SEC Files Lawsuit Against Founders of Alleged $650 Million Crypto Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) has initiated legal action against NovaTech and its founders, accusing them of orchestrating a Ponzi scheme that defrauded over 200,000 investors of approximately $650 million. The lawsuit aims to secure substantial compensation for the victims.

Nature of the Fraud

NovaTech purportedly promised guaranteed profits from day one, presenting an illusion of risk-free returns. According to the SEC, rather than investing the funds as claimed, the founders utilised new investments to pay off earlier participants and provide commissions to brokers, characteristic of a classic Ponzi scheme. The scheme collapsed in May 2023, after operating for four years. The New York District Attorney's Office has estimated the total losses at over $1 billion.

Religious Influence and Marketing Tactics

A distinctive aspect of this alleged fraud was its religious appeal. Co-founder Cynthia Petion, known as the "Reverend CEO," marketed NovaTech as a divinely inspired venture. The project was heavily promoted via social media platforms like Telegram and WhatsApp, including messages in Haitian Creole to target specific communities with religious and cultural connections.

Previous Scams and Continuation of Fraud

NovaTech's predecessor, AWS Mining, had previously promised high returns of 15-20% monthly but went bankrupt in 2019, leaving investors empty-handed. The founders then established NovaTech, replicating the fraudulent model. Despite managing over $1 billion in cryptocurrency deposits, NovaTech reportedly only traded $26 million of this amount before its shutdown in 2023.

Legal Proceedings and Charges

In addition to the SEC's lawsuit, six promoters of NovaTech have been charged with fraud for continuing to solicit investments despite evident red flags, such as delayed payouts and regulatory scrutiny in the U.S. and Canada. One promoter, Martin Zizi, has settled by agreeing to a $100,000 fine. Both the SEC and the New York District Attorney's Office are seeking restitution and penalties for the affected investors.