The US Securities and Exchange Commission (SEC) has filed charges against NovaTech Ltd and its founders for allegedly operating a fraudulent cryptocurrency scheme that raised over $650 million from more than 200,000 investors worldwide.

According to the SEC's complaint filed in a Florida federal court, married couple Cynthia and Eddy Petion ran NovaTech as a multi-level marketing and crypto asset investment programme from 2019 to 2023. The regulator alleges they lured investors by falsely claiming NovaTech would invest their funds in cryptocurrency and foreign exchange markets.

Cynthia Petion, who dubbed herself the "Reverend chief executive officer", reportedly assured investors their investments would be safe and promised they would be "in profit from day one". However, the SEC contends that NovaTech used the majority of investor funds to make payments to existing investors and pay commissions to promoters, investing only a fraction in actual trading.

The complaint further alleges the Petions siphoned millions of dollars of investor assets for themselves. When NovaTech collapsed in May 2023, most investors were unable to withdraw their investments, resulting in substantial losses.

"NovaTech and the Petions caused untold losses to tens of thousands of victims around the world," said Eric Werner, director of the SEC's Fort Worth Regional Office.

The SEC also charged six top promoters of NovaTech for their roles in recruiting investors. The regulator claims these promoters continued recruiting even after becoming aware of red flags, including regulatory actions taken against NovaTech by US and Canadian authorities.

The scheme allegedly targeted affinity groups, particularly Haitian-American churchgoers, via WhatsApp groups and promotional events. NovaTech's marketing materials promised investors 2-3 per cent returns per week and claimed to have never posted a weekly trading loss.

One promoter, Martin Zizi, has agreed to a partial settlement including a $100,000 civil penalty without admitting or denying the allegations. The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties against all defendants.

This action follows a similar lawsuit filed in June by New York Attorney General Letitia James, which estimated the fraud at over $1 billion. Both regulators have characterised the scheme as a pyramid fraud, where companies pay bonuses to recruit new investors.

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