The U.S. Securities and Exchange Commission (SEC) on Monday filed a suit in the U.S. District Court for the Southern District of Florida against crypto company NovaTech, its married co-founders, and 6 others for allegedly engaging in a $650 million crypto pyramid scheme.

According to a Monday press release, NovaTech and its founders, Cynthia and Eddy Petion, operated a crypto pyramid scheme and exploited more than $650 million in crypto assets from over 200,000 investors globally, a significant number of whom hail from the Haitian-American community.

The SEC’s enforcement action extends beyond the company and its founders. The lawsuit also applied to Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley, as they were the primary promoters who contributed to the scheme’s operation.

According to the SEC’s complaint, Eddy and his wife Cynthia operated NovaTech for 4 years, from 2019 to 2023, as a hybrid multi-level marketing and cryptocurrency investment program. 

The duo lured investors with false promises of safe investments in crypto assets and foreign exchange markets, assuring them of unusually high returns and instant profitability from the first day of investing.

However, contrary to their promises, the Petions allegedly misallocated new investments, primarily using them to repay earlier investors and pay promoter commissions while pocketing millions for themselves.

US SEC Charges NovaTech and Others to Court

The SEC alleges that NovaTech’s top promoters, Zizi, Dunbar, Corbett, Sampson, Garofano, and Hadley, formed networks and recruited investors under them. 

The promoters earned substantial commissions for each investor they recruited, and despite knowing about regulatory red flags against NovaTech, they chose to overlook and continue recruitment.

Concerning the scheme, Eric Werner, Director of the SEC’s Fort Worth Regional Office, said, “NovaTech and the Petions caused untold losses to tens of thousands of victims around the world.”

“As we allege, MLM schemes of this size require promoters to fuel them, and today’s action demonstrates that we will hold accountable not just the principal architects of these massive schemes but also promoters who spread their fraud by unlawfully soliciting victims.”

In line with the actions of the company, its founders, and top promoters, the regulators charged all participants with “violating the antifraud provisions of the federal securities laws and all of the defendants with registration violations.”

In a similar development, the US SEC filed a lawsuit against Ripple for fraud in 2020. The case ended with both parties securing partial wins, but the latter had to pay $125M as a settlement fine.