SEC claims $650M crypto pyramid scheme by NovaTech founders

The U.S. Securities and Exchange Commission (SEC) has charged cryptocurrency company NovaTech and its co-founders, Cynthia and Eddy Petion, with fraudulently raising over $650 million from more than 200,000 investors. 

The SEC claims that NovaTech operated a pyramid scheme, using funds from new investors to pay commissions to promoters and repay earlier investors. 

The co-founders allegedly assured investors that their funds were secure, but instead, they diverted millions for personal use.

The lawsuit, filed in a Miami federal court on August 12, 2024, comes after a previous lawsuit by New York Attorney General Letitia James, who found that NovaTech’s fraudulent activities amounted to over $1 billion. 

Many of the affected investors were Haitian-Americans, drawn in by promotions in the Haitian Creole language and appeals to religious faith on social media. 

Cynthia Petion, who referred to NovaTech as “God’s vision” and herself as "Reverend CEO," played a significant role in recruiting these investors.

In addition to the charges against the Petions, the SEC has also charged six NovaTech promoters with fraud. 

These promoters were aware of multiple “red flags,” including regulatory actions by U.S. and Canadian authorities and delayed withdrawals, yet continued to recruit new investors. 

The SEC's actions highlight the ongoing regulatory scrutiny of fraudulent schemes in the cryptocurrency sector.

The case against NovaTech is part of a broader trend where centralised cryptocurrency companies face increasing regulation as authorities aim to address security and legal concerns. 

According to GlobalData’s “Thematic Intelligence: Cryptocurrencies (2023)” report, the cryptocurrency market is expected to grow significantly, with revenues projected to reach $1.1 trillion by 2030. 

As the sector evolves, regulatory oversight is likely to play a critical role in shaping its future, particularly in preventing fraudulent activities like those alleged in the NovaTech case.