The U.S. Securities and Exchange Commission charged an obscure crypto trading firm with defrauding 200,000 investors worldwide.
Continuing its crypto fraud crackdown, the SEC has charged NovaTech, NovaTech, its executives, and affiliated promoters over a multi-level marketing fraud scheme that generated $650 million in digital assets.
The complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Cynthia and Eddy Petion orchestrated a four-year crypto investment scam through NovaTech. Operating between 2019 and 2023, the Petions promised investors day-one profits and guaranteed the safety of their capital.
According to the SEC, the duo recruited a group of promoters, including Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley, to help execute the fraudulent scheme. NovaTech then allegedly stole millions of dollars in investor cryptocurrencies and eventually blocked withdrawals.
“As we allege, MLM 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,” remarked Eric Werner, director of the SEC’s Fort Worth Regional Office, on Aug. 12.
Is the SEC partly to blame for crypto fraud?
This was the second U.S. watchdog to sue NovaTech over crypto fraud. In June, New York Attorney General Letitia James also accused the trading firm and its principles of masterminding a criminal operation.
Reacting to the news, Consensys attorney Bill Hughes questioned whether the matter could have been avoided if clear rules were in place and crypto service providers were allowed to register based on merit.
Industry voices have frequently blasted the securities beat cop for its “regulation by enforcement” approach to digital assets. Officials like chair Gary Gensler insist most cryptocurrencies fall under federal securities laws.
Crypto stakeholders disagree, sparking several legal battles, including cases against Coinbase and Ripple.
— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) August 12, 2024Yes sure the NY AG already sued Novatech founders and, if the allegations are to be believed, the DOJ should probably charge them, but this is the type of case no one can credibly complain about the SEC bringing.
Important question: How many of these cases aren’t being pursued…