SEC charges NovaTech with $650 million crypto fraud

The U.S. Securities and Exchange Commission has charged an obscure cryptocurrency trading firm with defrauding 200,000 investors around the world.

Continuing its crackdown on crypto fraud, the SEC has… loaded NovaTech, NovaTech, its executives and affiliated promoters for a multi-level marketing fraud scheme that generated $650 million in digital assets.

The complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Cynthia and Eddy Petion orchestrated a four-year cryptocurrency investment scam through NovaTech. In operations between 2019 and 2023, the Petions promised investors profits from day one and guaranteed the safety of their capital.

According to the SEC, the duo recruited a group of promoters, including Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley, to help them execute the fraudulent scheme. NovaTech then allegedly stole millions of dollars worth of cryptocurrency from investors and eventually blocked withdrawals.

“As we allege, MLM schemes of this size require promoters to fuel them, and today’s action demonstrates that we will hold accountable not only the principal architects of these massive schemes but also the promoters who spread their fraud by illegally recruiting victims,” Eric Werner, director of the SEC’s Fort Worth Regional Office, said on August 12.

Is the SEC partly to blame for crypto fraud?

This was the second US regulator to sue NovaTech for cryptocurrency fraud. In June, New York Attorney General Letitia James also accused the trading firm and its executives of planning a criminal operation.

Reacting to the news, Consensys attorney Bill Hughes questioned whether the matter could have been avoided if there had been clear rules and crypto service providers were allowed to register based on their merits.

Industry voices have frequently criticized the securities regulator for its “regulation by enforcement” approach to digital assets. Officials such as Chairman Gary Gensler insist that most cryptocurrencies are subject to federal securities laws.

Cryptocurrency stakeholders disagree, leading to several legal battles, including cases against Coinbase and Ripple.

<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter“>