SEC Lawsuit Accuses NovaTech Leaders and Promoters of Defrauding Crypto Investors Out of $650 Million
On Monday, August 12, 2024, the Securities and Exchange Commission announced that it had charged NovaTech Ltd. and its principals Cynthia and Eddy Petion with operating a $650 million cryptocurrency fraud scheme that impacted over 200,000 investors worldwide. The SEC also charged several promoters who helped perpetuate the fraud.
According to the SEC’s complaint, NovaTech was operated as a multi-level marketing program by the Petions from 2019 through 2023. They allegedly lured investors by claiming funds would be invested in cryptocurrency and foreign exchange trading to generate profits. Cynthia Petion reportedly assured investors their money would be safe, and they would profit from day one.
In reality, the complaint states NovaTech used the majority of the over $650 million invested to pay existing investors and commissions to promoters, dedicating only a small portion to actual trading which generated losses. The Petions are also accused of siphoning millions for personal use. When NovaTech collapsed, investors were mostly unable to withdraw their money, incurring substantial losses.
The SEC charged that NovaTech and the Petions violated anti-fraud and registration provisions of federal securities laws. Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley were also named as promoters who helped spread the fraud. Each recruited extensive investor and promoter networks compensated by NovaTech.
Though some promoters became aware of regulatory actions and red flags, the complaint alleges Zizi, Dunbar, Corbett, and Sampson continued recruiting and downplayed the issues. All parties have been charged civilly by the SEC, which is seeking financial penalties, disgorgement of profits, and permanent bans on future securities law violations.
Zizi has partially settled the charges, consenting to a $100,000 fine without admission of guilt, with other financial remedies to be determined later. The SEC conducted a lengthy investigation aided by its Crypto Assets and Cyber Unit. The case is being litigated in federal court in Florida.
SEC Director Eric Werner stated massive fraudulent schemes require promoters to expand, and the SEC will hold both architects and promoters accountable for unlawfully enticing victims.
