The U.S. Securities and Exchange Commission (SEC) has charged a lesser-known crypto trading firm with defrauding 200,000 investors globally. Continuing its crackdown on crypto fraud, the SEC has taken action against 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 immediate profits and assured 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 is accused of stealing millions of dollars in investor cryptocurrencies and eventually blocking 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.

This marks the second time a U.S. watchdog has sued NovaTech over crypto fraud. In June, New York Attorney General Letitia James also accused the trading firm and its principals 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 criticized the SEC for its “regulation by enforcement” approach to digital assets. Officials like chair Gary Gensler maintain that most cryptocurrencies fall under federal securities laws.

Crypto stakeholders disagree, sparking several legal battles, including high-profile cases against Coinbase and Ripple.

Encouragingly, the SEC’s actions demonstrate a commitment to holding not just the principal architects but also the promoters accountable for spreading fraudulent schemes. This serves as a reminder for investors to exercise caution and conduct thorough research before committing to any investment opportunities.

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