Cryptocurrency News – SEC sues NovaTech for alleged cryptocurrency fraud

The Securities and Exchange Commission said Monday that Cynthia and Eddy Petion and their company NovaTech operated an illegal scheme that bilked tens of thousands of investors globally out of more than $650 million in cryptocurrency assets.

“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,” SEC Fort Worth Regional Office Director Eric Werner said in a statement.

In addition to the Petions, the SEC is charging six other individuals with promoting NovaTech to investors, many of whom were Haitian-American.

The Petions operated a crypto asset investment program between 2019 and 2023, luring investors with the claim that NovaTech would invest their money into crypto assets on foreign exchange markets, according to the SEC.

While the investors were assured of profit from day one and promised access to their capital, NovaTech instead used most of the investments to pay existing investors and commissions to promoters. Only a fraction of the investors’ money was used for trades, the SEC said. The Petions also siphoned millions of dollars in investments for themselves.

When NovaTech collapsed in May 2023, most investors weren’t able to withdraw their money.

In a complaint filed in the U.S. District Court for the Southern District of Florida, the SEC is seeking disgorgement of ill-gotten gains, civil penalties and a court order that will prohibit the Petions and NovaTech’s promoters from engaging in similar activities going forward.

Earlier this year, New York Attorney General Letitia James sued NovaTech and the Petions in a Manhattan state court, saying they had defrauded investors of more than $1 billion.

Monday’s SEC charges come four days after the Commodity Futures Trading Commission said the former cryptocurrency exchange founded by convicted fraudster Sam Bankman-Fried will need to pay $12.7 billion to former FTX customers and other victims.

Similar to NovaTech, FTX billed itself as a safe and easy way to inveset in cryptocurrency, promising it had kept customer and FTX assets separate when the company instead commingled and misappropriated funds.

Bankman-Friend was convicted of fraud and other crimes in November 2023. In March, the U.S. Department of Justice sentenced him to 25 years in prison and ordered him to pay $11 billion in forfeiture for orchestrating several fraudulent schemes.