Crypto pyramid Novatech sued for fraud of 650 million US dollars
Novatech sold itself as a crypto fund with weekly returns, but turned out to be a Ponzi scheme. Now the operator and promoter are being sued.
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The US Securities and Exchange Commission (SEC) has brought charges against Novatech and eight of its promoters. According to the SEC, this is a pyramid game with cryptocurrencies and not crypto funds with weekly returns of 2 to 3 percent, as Novatech proclaimed. According to the indictment, the company defrauded more than 200,000 investors of around 650 million US dollars.
Novatech was run by Cynthia and Eddy P., who are said to reside in Panama. The couple and their promoters allegedly focused on Americans of Haitian descent and used religious undertones to persuade them to invest via WhatsApp groups and promotional events. For example, Cynthia P. claimed that the founding of Novatech was a "vision from God". She also referred to herself as the "pastor CEO" in marketing documents.
Deposits not invested as promised
Investors were promised that their deposits would be traded collectively on cryptocurrency exchanges and currency markets. This would generate returns of 2 to 3 percent per week. Novatech also promised that it would never make weekly losses. According to the indictment, however, only a small portion of the money collected was actually invested and this had "significant trading losses". Instead, the income flowed into the pockets of the founding couple and was paid out to previous investors, the well-known multi-level marketing or Ponzi scheme.
In the period from June 2019 to May 2023, Novatech raised a total of around 650 million dollars from over 200,000 investors. Novatech ran into difficulties back in October 2022 when investors noticed delays in payouts that they had ordered on Novatech's website. Several regulatory authorities in the USA and Canada became aware of this and issued cease-and-desist orders for Novatech. In May 2023, the operating couple shut down Novatech and took the website offline so that payouts were no longer possible.
Promoters too good-natured, fines threatened
The accused promoters, who profited from new investors, are accused of disregarding warning signals. After the first official measures against Novatech and the payout problems, they were simply placated by the founding couple ("legal department will take care of it"). They then continued to promote Novatech and recruit new investors.
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The US Securities and Exchange Commission is accusing Novatech and its operators of fraud and violations of the securities registration provisions of the federal securities laws. For example, the company described itself as a "registered hedge fund", which is not accurate. Meanwhile, the defendant promoters allegedly violated the antifraud, securities registration, and broker registration provisions of the federal securities laws. The SEC seeks a jury trial in the United States District Court for the Southern District of Florida (Case No. 1:24-cv-23058). The defendants are ordered to make restitution to investors and face substantial monetary penalties.
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