Crypto fraudsters bilked $650M from thousands of victims, SEC says

At least eight individuals were charged by the US Securities and Exchange Commission (SEC) on Monday for scamming hundreds of thousands of victims out of a total of $650 million worth of crypto assets.

Thousands of unsuspecting investors were said to have been lured by two married suspects running a multi-level marketing scheme through their company, NovaTech Ltd., which is based in Florida.

The couple, Cynthia and Eddy Petion, are accused of operating a pyramid scam that collected more than $650 million in crypto assets from more than 200,000 investors worldwide.

The SEC said many of the victims were from the Haitian-American community. Haiti, is one of the Caribbean’s poorest islands.

The suspects, and six others involved in promoting the “crypto asset investment program,” operated the MLM ruse for about 5 years, from 2019 until the SEC cracked down last year.

Multi-level marketing is a pyramid model, where a direct-sales company (in this case NovaTech) would recruit an initial round of investors to become part of the scheme. Those investors/promoters are then encouraged to recruit another round of investors for a percentage of the profits, and on it goes.

Although not illegal, in most MLM programs, the majority of those third, fourth, and fifth-round, et. recruits never see a return on their original investment, while the core group running the MLM scheme will make significant profits off the backs of all those targeted recruits.

Regulators say the couple, along with six other suspects, would unlawfully solicit victims with the promise of investing funds in crypto assets and foreign exchange markets.

The SEC claims that Cynthia Petion assured victims that their money would be safe. The court documents said that Cynthia Petion told victims that “[i]n this program, you are in profit from day one because again you have access to that capital.”

But instead of investing or trading the funds, NovaTech used most of the money to make payments to existing investors and/or pay commissions to promoters, typical of an MLM scheme.

The couple also took millions of dollars out of the pot for their own personal use, leaving most “investors” with nothing when the company eventually collapsed.

“NovaTech and the Petions caused untold losses to tens of thousands of victims around the world,” said Eric Werner, Director of the SEC’s Fort Worth Regional Office.

“MLM schemes of this size require promoters to fuel them, and we will hold accountable not just the principal architects of these massive schemes but also promoters who spread their fraud,” Werner said.

The six suspects charged for helping to promote NovaTech and the pyramid scheme are Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley.

The SEC alleges the six were paid substantial commissions to recruit a wide network of investors and promoters and continued to do so even after the SEC took action against NovaTech.

The eight suspects face charges ranging from SEC registration violations to violations of federal antifraud provisions. One of the victims, Zizi, has agreed to pay a civil penalty of $100,000 in exchange for avoiding further prosecution pending court approval.