SEC charges NovaTech with $650 million in cryptocurrency fraud

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.

SEC press release

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.

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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.