The U.S. Securities and Exchange Commission (SEC) is suing a crypto startup, NovaTech, for allegedly fraudulently raising more than $650 million from over 200,000 investors, many in the Haitian-American community.

The SEC frames NovaTech, founded in 2019 by husband-and-wife duo Cynthia and Eddy Petion, as a multi-level marketing (MLM) scheme -- one that lured investors by claiming to invest in profitable crypto and foreign exchange markets. In truth, NovaTech reserved only a fraction of investor funds for trading, devoting the bulk to its payments to existing investors and commissions for promoters, according to the SEC.

The Petions siphoned millions of dollars of investor assets for themselves, alleges the SEC. And when the company collapsed, most customers -- recruited by promoters who downplayed NovaTech's red flags -- found themselves unable to make withdrawals.

"NovaTech and the Petions caused untold losses to tens of thousands of victims around the world," Eric Werner, director of the SEC’s Fort Worth regional office, said in a statement. "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."

In addition to NovaTech and the Petions, the SEC names NovaTech promoters Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano and Marsha Hadley as defendants in its securities anti-fraud suit. The agency is seeking permanent injunctive relief, disgorgement of ill-gotten gains and civil penalties; Zizi has already agreed to partially settle.

"Overall, this, sadly, appears to be a textbook affinity group ponzi scheme," Seth Goertz, partner at law firm Dorsey & Whitney and former assistant U.S. attorney with the Department of Justice, told TechCrunch via email. "The size and scale of the scheme is noteworthy, though, and you always wonder whether it would have been possible if it was tied to traditional fiat currency, rather than cryptocurrency, which remains ethereal enough that fraudsters can more easily promise grand returns."

The suit against NovaTech is only the latest development in the SEC's broader crackdown on legally dubious crypto ventures.

In 2020, the SEC took Ripple, the blockchain developer and creator of the XRP cryptocurrency token, to court for allegedly raising more than $1.3 billion in 2013 by selling XRP in an unregistered security offering to investors. Just last month, the SEC charged BitClout founder Nader Al-Naji with fraud, saying that the proceeds from the startup's crypto activities paid for Al-Naji's LA mansion and gifts. And the SEC has sent letters to VCs over their involvement with decentralized crypto exchange operator Uniswap Labs, reported Axios on Monday.

In a recent address at the William & Mary Business Law Review, Gurbir Grewal, director of the SEC's division of enforcement, said that the agency has taken over 100 crypto-related actions over the past decade.