Photo credit: Tierney L. Cross/Bloomberg

On Aug. 13, the US Securities and Exchange Commission (SEC) announced that they had charged Cynthia and Eddy Petion, and their trading service firm, NovaTech, for “operating a fraudulent scheme” that raised more than $650 million in crypto assets from more than 200,000 investors worldwide. 

The SEC also charged Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley for prompting NovaTech to investors. 

According to the SEC’s report, NovaTech was used by the founders as a “multi-level marketing (MLM) and crypto asset investment program from 2019 through 2023,” luring investors by assuring safety and profits from day one. 

After receiving funds from investors, the SEC claimed that NovaTech had used investors to make payments to existing investors and to pay commissions to promoters. NovaTech’s founders allegedly withdrew the investor’s assets worth millions without permission to use it for themselves.

During the collapse of NovaTech back in May 2023, investors were not able to withdraw their investments, resulting in substantial losses. The SEC’s complaint — filed in the US District Court for the Southern District of Florida — seeks permanent injunctive relief, disgorgement of the illegal gains, and civil penalties for violating “the antifraud provisions of the federal securities law”. 

Zizi, one of the promoters of NovaTech, has agreed to partially settle the SEC’s charges by consenting to a $100,000 civil penalty, with the condition to be “permanently enjoined from future violations of the charged provisions.” The partial settlement is still yet to get approval from court.

Although NovaTech collapsed in 2023, the first US legal action against the company was initiated by Attorney General Letitia James this year.  

On June 9, Attorney General James sued the crypto trading company NovaTech, its founders, and the crypto mining company AWS Mining for “engaging in illegal pyramid schemes.” An investigation conducted by Attorney General James revealed that Cynthia and Eddy Petion started AWS Mining and promised investors high profits through its crypto mining operations. 

When the crypto mining company was unable to generate revenue, it closed down in 2019, breaking its promises to its investors. After the collapse of AWS Mining, the Petion couple started NovaTech and once again promised high returns. However, NovaTech’s fraudulent operations resulted in losses for its investors.