The married co-founders of cryptocurrency firm NovaTech, Cynthia and Eddy Petion, are the targets of a lawsuit brought by the SEC.
It is alleged to be a massive fraud scheme that targeted 200,000 investors worldwide, including multiple from the Haitian-American Community.
The Fraud Scheme of NovaTech
According to the SEC, NovaTech and its owners have raised more than $650 million from investors in 4-years. They promised the investors that their money would be safe with them and they would be “in profit from day one”. But, both the founders did not invest anyone’s money according to the SEC.
They used the money to repay the earlier investors and pay commissions to the early promoters. And the rest of the millions were used by the Petions for themselves.
This scheme worked from the day the company started till May 2023. Then, the SEC filed a lawsuit in Miami federal court to help the victims get justice.
Targeting only the Haitian-American Community
The most striking feature of this fraud by NovaTech is that they only targeted the Haitian-American community.
It is claimed that the Petions had a master plan to target the religious beliefs of people of the Haitian-American community through various social media platforms and WhatsApp as well. And some of their marketing strategies also included the Haitian Creole.
The founder Cynthia Petion called herself “Reverend CEO” and she also claimed NovaTech as ‘“God’s vision”. This approach clearly shows how they portrayed themselves and their company to play with the religious beliefs of the Haitian-American community.
Legal Actions and Investigations against NovaTech
The SEC’s lawsuit is not the only legal lawsuit against NovaTech and the Petions. In December 2023, an Attorney General from New York Letitia James filed a separate lawsuit in Manhattan state court, estimating fraud of more than $1 billion.
Both the chargers have concluded that this fraud scheme was a pyramid operation that began with companies paying bonuses or commissions to recruit new investors.
This type of work structure is already seen as a fraud as it grows quickly but eventually collapses, leaving most people connected to it with huge losses.
The government cannot find the Petions. Their location is uncertain, but it is guessed that they might be living in Panama. As of now, the Petions and lawyers of NovaTech have not been found or identified nor anyone has come forward to accept the allegations
Promoter Settlement
As per recent development, one of the promoters of NovaTech Martin Zizi has agreed to pay a $100,000 civil fine to settle the charges related to his involvement in promoting NovaTech and its scheme.
Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley were also charged by the U.S. Securities and Exchange Commission (SEC) for their involvement in promoting NovaTech to investors.
This means that the legal authorities are also involved and targeting the promoters who promoted NovaTech and expanded their fraud plan.
Implications for Cryptocurrency Regulation
The NovaTech case highlights the serious ongoing challenges faced by the regulators in overseeing the fast-growing cryptocurrency frauds in the crypto industry.
The ability of big fraud companies and planners to exploit the already existing poor people shows the nature of cryptocurrency investments and it continues to be a very big concern for authorities around the world.
SEC’s straight action against NovaTech does implement a little bit of an aggressive approach towards the frauds in the cryptocurrency industry but a lot is still yet to be done in this case.
This fraud scheme also presses the need for investor education and due diligence, especially when dealing with less established cryptocurrency companies claiming big promises.
Victim Impact and Recovery
This fraud had a deep impact on the victims. Many of them invested their life savings in NovaTech. So its impact is deeper than it seems to be.
The SEC and the New York Attorney General’s office are trying to seek justice and restitution for all the investors but the whole process of recovering the lost money in these types of cases is not easy, the process can be very long.
Also, Read: Avoiding Investment Scams: Essential Tips
Conclusion
This NovaTech case is a reminder of the potential risks associated with investing in Cryptocurrency, especially in those companies that promise unrealistic outcomes in returns.
As the crypto industry evolves, cases like NovaTech need proper regulations and time so that the loss can be remitted.
