SEC Lodges Fraud Case Against NovaTech Backers, Claimed $650M Crypto Pyramid Scheme
Mitchell Nixon
On Monday, the American financial regulator launched legal proceedings against NovaTech and eight individuals associated with its promotion. The lawsuit alleges that the cryptocurrency venture operated as a pyramid scheme, accusing the defendants of deceitful practices and breaching numerous financial regulations.
The regulatory body claims that over a four-year span, NovaTech’s purported fraudulent activities resulted in approximately $650 million in investor losses. This legal action follows a similar case brought forward by New York’s chief legal officer two months prior, which targeted NovaTech, its founders, and another supposedly linked pyramid operation.
Court documents suggest that NovaTech and its advocates specifically targeted particular communities, notably Haitian Creole-speaking churchgoers both within and outside the United States. The operation allegedly employed messaging platforms and hosted events to entice more than 200,000 individuals worldwide into investing. From mid-2019 to May 2023, when the venture reportedly crumbled, the total sum invested is believed to have reached $650 million.
The enterprise was reportedly spearheaded by an American couple, now thought to be residing in Panama. Along with several associates, all of whom are named in the legal action, they allegedly exploited religious sentiments to attract investors. The female co-founder, who styled herself as a spiritual business leader, claimed divine inspiration for the venture’s inception, purportedly receiving a celestial message during her dental hygiene routine.
Prospective backers were led to believe their capital would be collectively invested in cryptocurrency and foreign exchange markets. Marketing materials boasted of consistent weekly profits ranging from 2% to 3%, with claims of never incurring a weekly trading deficit.
However, the financial watchdog contends that only a minute portion of the invested funds was actually traded, and even this small amount reportedly suffered considerable losses. The regulatory body alleges that the operation functioned as a classic fraud scheme, utilising new investments to reward earlier participants. Furthermore, the founders are accused of syphoning off millions for personal use.
The venture’s decline reportedly began in autumn 2022 when investors encountered significant obstacles in withdrawing their funds. Subsequently, multiple North American financial regulators issued orders to halt the company’s operations. By late spring 2023, the founders had allegedly shuttered the business and taken its online presence offline, leaving remaining investors unable to access their capital.
The financial regulator’s legal filing contends that the cryptocurrency venture and its founders breached multiple statutes relating to fraud prevention and proper securities registration. The individuals involved in promoting the scheme are facing similar accusations, with the additional charge of operating without proper broker credentials.
In its pursuit of justice, the regulatory body is petitioning the court for several remedies. These include a permanent ban on the defendants’ involvement in similar activities, the return of ill-gotten gains plus interest, and substantial monetary penalties.
One of the accused promoters has already reached a partial agreement with the authorities. Without confirming or refuting the allegations, this individual has consented to pay a fine of $100,000 and accept a lifelong prohibition from engaging in activities that might violate securities laws. However, this arrangement still requires judicial approval before it can be formally enacted.