SEC Charges NovaTech and its Founders and Promoters with Fraudulent Crypto Scheme

SEC Charges NovaTech and its Principals and Promoters with $650 Million Crypto Fraud

The Securities and Exchange Commission today announced charges against Cynthia and Eddy Petion, along with their company, NovaTech Ltd., for 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 roles in promoting NovaTech to investors.

According to the SEC’s complaint, the Petions operated NovaTech as a multi-level marketing (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 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 complaint further alleges that the Petions siphoned millions of dollars of investor assets for themselves. When NovaTech ultimately collapsed, most investors were not able to withdraw their investments, resulting in substantial losses, according to the complaint.

Did summer holidays make this week’s market turmoil worse?

Senior investors scrambled to respond to the global sell-off from their holiday homes, and junior traders struggled to keep up with the unfolding chaos as markets plunged then recovered this week. Those left at their desks said a lack of liquidity — the volume of money shifting around world financial markets, slowed by thin staffing over the holidays — made the market ructions worse.

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The few traders not yet sunning themselves in warmer climes — and able to answer the FT’s calls — described frantic office scenes on Monday as Japan’s Topix index suffered its sharpest sell-off since October 1987.

“One guy I know was going to see the field hockey at the Olympics, on the Eurostar,” said a merger arbitrage trader who asked to remain anonymous. “He went into the tunnel and he had no connection right when contagion was spreading. Eurostar’s WiFi or lack of it probably cost him millions of dollars.”

Tether Co-Founder Faces the Unraveling of a Crypto Dream

When he moved to Puerto Rico in 2017, Mr. Pierce, an investor in a range of experimental crypto ventures, made headline-grabbing promises to revive the local economy, with the help of a tech-bro brain trust. Best known for his role in the creation of Tether, one of the world’s most popular digital currencies, Mr. Pierce led a wave of industry migrants to Puerto Rico, many of whom started buying land and trumpeting a project they called Puertopia — the transformation of the U.S. territory into a hub for crypto investors and technology start-ups.

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But Mr. Pierce’s vision of a crypto-fueled economic turnaround has yet to materialize, according to hundreds of pages of court records and interviews with more than two dozen people familiar with his efforts in Puerto Rico. His business partners have turned on him, and some colleagues say he is running out of cash. There is no clear evidence that the arrival of tech entrepreneurs has helped the local economy. Instead, the Act 60 arrivals have become symbols of a new era of exploitation.

A B C, Easy as 1 2 3: Acronyms and Initialisms in the Securities Industry

The history of FINRA’s name is fascinating (if you’re in the securities business—and something of a nerd)….

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Fast forward several decades. In 2007, NASD “consolidated with the member regulation, enforcement, and arbitration functions of the NYSE.” At the time, there was speculation in the news media about what name the new regulator would take:

Joseph Borg, president of the North American Securities Administrators Association (that’s NASAA, not the rocket scientists), offered some suggestions: MegaReg didn’t go over well, he said, and neither did United States Securities Regulation – USSR.

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Brian Rubin, a former NASD deputy chief counsel now at law firm Sutherland Asbill & Brennan, proposed Coordinator of the Securities Industry, or “CSI: Wall Street.”

In June 2007, NASD announced, “the member regulation arms of the NASD and NYSE Regulation [would] join forces” under the acronym SIRA (Securities Industry Regulatory Authority). Less than a month later, NASD “changed its mind” because “[i]t turns out SIRA sounds similar to an Arabic word, commonly spelled Sirah, which refers to the biographies of the Prophet Muhammad.” One article about the “snafu” (situation normal: all—um—“fouled” up) was titled, “Que SIRA, SIRA.” NASD quickly regrouped and “determined that it was appropriate to select the alternative name of Financial Industry Regulatory Authority, or FINRA, for our new organization.”

U.S. Crypto Insiders Courting Vice President Harris Chase Whispers of Her Openness

Industry insiders have been conducting meetings with officials connected to the White House, and though one of those meetings last week included a senior adviser from Harris’ own office, the sessions have been predominantly one-sided and had nothing to do with her campaign. Meanwhile, some crypto executives and investors are pursuing a few emerging efforts to support Harris as the presumptive Democratic presidential candidate, even without a direct indication of how she’ll approach the sector.

This week, the fledgling “crypto4harris” effort kicks off Wednesday with an online forum at which prominent industry figures are expected to gather under the vice president’s banner. Such initiatives don’t yet have formal ties to the Harris campaign.