The SEC has filed charges against NovaTech and its founders, accusing the company of running a $650 million pyramid scheme that exploited over 200,000 investors globally.
Points
- The SEC charges NovaTech with operating a massive crypto pyramid scheme.
- Founders Cynthia and Eddy Petion allegedly defrauded investors, particularly targeting the Haitian-American community.
- NovaTech falsely promised high returns through crypto and forex investments.
- Most investor funds were used to pay earlier investors and for personal enrichment.
- The SEC seeks severe penalties, including the return of misappropriated funds.
The U.S. Securities and Exchange Commission （SEC） has launched a significant legal action against NovaTech, a company accused of orchestrating a $650 million cryptocurrency pyramid scheme. According to the SEC’s complaint, NovaTech and its founders, Cynthia and Eddy Petion, lured over 200,000 investors worldwide with promises of lucrative returns, primarily through investments in digital assets and foreign exchange markets.
NovaTech, registered in Saint Vincent and the Grenadines, claimed to operate as a “registered hedge fund” offering daily returns of up to 3%. However, the SEC alleges that these claims were nothing more than a facade. In reality, the company traded only a fraction of the funds it collected and incurred substantial losses. The bulk of the investor money was instead used to pay off earlier investors—a hallmark of a classic Ponzi scheme—and to line the pockets of the Petions.
The scheme’s reach was particularly devastating for the Haitian-American community, which was heavily targeted through affinity fraud. The Petions exploited their cultural ties and used religious appeals to gain the trust of investors, promising financial freedom and independence. As the scheme grew, NovaTech attracted attention from influencers and used their platforms to further propagate the fraudulent operation.
The SEC’s action against NovaTech is not the first legal challenge the company has faced. Earlier this year, New York Attorney General Letitia James filed a lawsuit against NovaTech and its founders on behalf of thousands of defrauded investors. The SEC’s complaint adds to the mounting legal pressure on the company, which ceased operations in May 2023 after a wave of investors attempted to withdraw their funds, only to find their money inaccessible.
Eric Werner, the director of the SEC’s Fort Worth Regional Office, emphasized the scale of the fraud, stating, “NovaTech and the Petions caused untold losses to tens of thousands of victims around the world.” The SEC is seeking permanent injunctive relief, civil penalties, and the return of funds misappropriated from investors.
This case serves as a stark reminder of the risks associated with high-yield investment schemes, particularly those that promise guaranteed returns. Investors are urged to exercise caution and conduct thorough due diligence before committing their funds to any investment opportunity, especially in the volatile world of cryptocurrency.
解説
- Affinity Fraud Risks: Affinity fraud occurs when scammers exploit the trust of individuals within a specific community or group, often using shared cultural or religious backgrounds to build credibility. This tactic was used extensively by NovaTech to target the Haitian-American community, highlighting the need for heightened awareness and skepticism among potential investors.
- Pyramid vs. Ponzi Schemes: While pyramid schemes rely on recruiting new members to pay returns to earlier investors, Ponzi schemes use the money from new investors to pay returns to existing ones without actually investing in legitimate business activities. NovaTech’s operation exhibited characteristics of both, which is why it attracted the attention of regulatory authorities.
- Regulatory Crackdown: The SEC’s aggressive action against NovaTech signals a broader crackdown on fraudulent crypto schemes. As the cryptocurrency market continues to evolve, regulators are increasingly focused on protecting investors from scams that exploit the complexities of digital assets and financial technologies.