SEC charges NovaTech with $650 million in cryptocurrency fraud
The company operated as a Ponzi scheme and paid out funds to existing members at the expense of the investments of newcomers
13.08.2024 - 14:00
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What’s new? The US Securities and Exchange Commission (SEC) has accused NovaTech of running a fraudulent scheme that raised more than $650 million in cryptocurrencies from more than 200 000 investors worldwide between 2019 and 2023. NovaTech operated a multi-level marketing (MLM) scheme and promised participants to invest their funds in crypto assets and currency markets.
What else is known? Charges have been filed against company executives Cynthia and Eddie Petion, as well as the scheme main promoters Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano and Marsha Hadley. The accomplices guaranteed victims that their funds would be safe and promised returns from the first day of investment.
In reality, NovaTech operated as a pyramid scheme and used the funds of new entrants to pay off existing investors. The bulk of the money was embezzled by management or used to pay promoters, with only a small portion of the money used for trading activities. When NovaTech eventually collapsed, most participants were unable to withdraw their investments and suffered substantial losses.
The main promoters organized a wider network of investors and promoters, for which they received substantial amounts in commissions. They continued to operate even after they became aware of the suspicions of regulators in the US and Canada.
The accomplices are accused by the SEC of violating securities laws as well as failing to register. At this point, one of the defendants, Martin Zizi, has agreed to pay a $100 000 fine without admitting or denying the charges. The settlement of claims against him must also be approved by the court.
Regulators in New York, California, British Columbia and Ontario were involved in the investigation.
Jury in the US recognized cryptocurrency as a security for the first time in the HYDRO token fraud case
Two former senior executives at Hydrogen Technology received up to 45 months in prison for manipulating the asset’s exchange rate
In May, UK authorities shut down Desmond Amey's crypto consulting firm Amey Finance Academy for promoting investment in crypto Ponzi schemes. Among his clients, Amey promoted, among other things, the Australian pyramid scheme HyperVerse (formerly HyperFund), which raised over $1,7 billion in two years.
Earlier this year, the SEC also filed a lawsuit against HyperVerse.
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