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Key Takeaways:
- The U.S. Securities and Exchange Commission (SEC) has filed charges against NovaTech, accusing it of running a $650 million crypto pyramid scheme.
- NovaTech allegedly duped over 200,000 investors worldwide, primarily Haitian-Americans, promising high returns through a trading platform.
- The SEC claims that NovaTech’s founders, Cynthia and Eddy Petion, misappropriated investor funds for personal gain.
- NovaTech’s operations were based on a Ponzi scheme, paying earlier investors with funds from new investors.
- The SEC is seeking to freeze assets, impose penalties, and permanently bar NovaTech’s promoters from participating in the securities industry.
Detailed Overview:
The U.S. Securities and Exchange Commission (SEC) has launched legal action against NovaTech, labeling it a crypto pyramid scheme that allegedly defrauded investors of approximately $650 million. This follows a similar lawsuit filed by New York Attorney General Letitia James in June.
NovaTech, co-founded by Cynthia and Eddy Petion, targeted a significant portion of its investor base within the Haitian-American community. The company enticed over 200,000 investors globally with promises of substantial returns generated through a proprietary trading platform. However, the SEC contends that this platform was a façade, and the actual operations of NovaTech were characteristic of a Ponzi scheme.
According to the SEC’s complaint, NovaTech and its promoters, including Cynthia and Eddy Petion, and individuals like Martin Zizi, James Corbett, Corrie Sampson, Dapilinu Dunbar, John Garofano, and Marsha Hadley, employed deceptive tactics to lure investors. They capitalized on religious affiliations within the Haitian-American community, with Cynthia Petion even referring to herself as the “Reverend CEO.”
Investor funds, totaling $650 million between 2019 and 2023, were allegedly mismanaged. A minimal portion was invested, and the remainder was diverted to personal accounts by the Petions and their associates. This aligns with the modus operandi of a Ponzi scheme, where returns to early investors are funded by contributions from subsequent investors.
The scheme began to unravel in late 2022 as investors encountered difficulties withdrawing their funds. Regulatory actions from state securities regulators in the U.S. and Canada further exacerbated the situation, leading to NovaTech’s collapse in May 2023.
The SEC is seeking significant penalties, including disgorgement of ill-gotten gains, and a permanent ban on NovaTech’s promoters from engaging in securities-related activities.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoasset