SEC Charges MLM With $650 Million Crypto Fraud of 200K Investors
The U.S. Securities and Exchange Commission charged Cynthia and Eddy Petion, along with their company, NovaTech Ltd., with operating a fraudulent scheme that raised more than $650 million in crypto assets from more than 200,000 investors worldwide, including many in the Haitian-American community.
The SEC also charged Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley for their alleged roles in promoting NovaTech to investors.
According to the SEC’s complaint, the Petions operated NovaTech as a multilevel marketing, or MLM, and crypto asset investment program from 2019 through 2023. They lured investors by claiming NovaTech would invest their funds on crypto asset and foreign exchange markets. Cynthia Petion assured investors that their investments would be safe and promised that “[i]n this program, you are in profit from day one, because again you have access to that capital.”
In reality, NovaTech allegedly used the majority of investor funds to make payments to existing investors and to pay commissions to promoters, using only a fraction of investor funds for trading. The SEC complaint further alleges that the Petions siphoned millions of dollars of investor assets for themselves. When NovaTech ultimately collapsed, according to the complaint, most investors were not able to withdraw their investments and suffered substantial losses.
“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 office. “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.”
The SEC’s complaint alleges that NovaTech’s top promoters – Zizi, Dunbar, Corbett, Sampson, Garofano, and Hadley – each recruited a wide network of investors and promoters. NovaTech paid them substantial commissions for the investors they and their networks recruited. When Zizi, Dunbar, Corbett, and Sampson became aware of certain red flags about NovaTech, including regulatory actions taken against it by U.S. and Canadian regulators, they continued recruiting investors and downplayed the red flags.
This is just the latest SEC crackdown on frauds targeting the Haitian-American community. In July 2024, the SEC charged two Broward County, Fla., residents with violations of the securities registration and broker-dealer registration provisions of the federal securities laws in connection with their participation in an unregistered securities offering that fraudulently raised approximately $112 million from 1,500 mostly Haitian-American investors. And 40-year-old Marc Henry Menard, using his standing within the Haitian-American community, was charged in in New York in June 2024 with allegedly defrauding more than 50 individuals of at least $1.65 million.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges NovaTech, the Petions, Zizi, Dunbar, Corbett, and Sampson with violating the antifraud provisions of the federal securities laws and all of the defendants with registration violations. The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties. Without admitting or denying the allegations, Zizi agreed to partially settle the SEC’s charges by consenting to a $100,000 civil penalty and to be permanently enjoined from future violations of the charged provisions, with the amount of other monetary remedies to be determined at a later date. The partial settlement is subject to court approval.
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