The U.S. Securities and Exchange Commission sued a cryptocurrency pyramid scheme against NovaTech and eight of its promoters on Monday, accusing them of fraud and multiple violations of federal securities laws.
The SEC said in its filing that Novatek defrauded investors with about $650 million over four years. The lawsuit comes two months after New York Attorney General Letitia James sued Novatec and its founders.
According to the SEC complaint, Novatec and its promoters exploited Haitian-speaking church goers in the United States and abroad via WhatsApp groups and promotional events, persuading more than 200,000 investors around the world to pay $650 million between June 2019 and May 2023.
The company’s founders, American couple Cynthia and Eddie Peyton, who are believed to now live in Panama, and the promoters — including Martin Zizi, James Corbett, Cory Sampson, D’Abelinho Dunbar, John Garovano and Marsha Hadley, all defendants in the SEC lawsuit — used ‘religious connotations’ when attracting investors. Cynthia Peyton called herself the ‘CEO Chaplain’ in Novatek promotional materials and on her social media profiles, and claimed that Allah sent her a ‘vision’ to start the company while brushing her teeth.
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Ponzi scheme
Potential investors in Novatek believed that their investments would be pooled and then traded in the cryptocurrency and forex markets. Novatek’s marketing materials promised investors 2-3% weekly returns, according to the SEC.
But according to the SEC, only a small portion of investors’ money was actually invested – and the money invested incurred ‘significant losses’. Instead, the Peyton family and their employees allegedly used the money in the Ponzi scheme, where they use the money of new investors to make payments to previous investors. They also allegedly transferred millions of dollars of investors’ money to themselves.
The scheme began to collapse in October 2022, as investors began to face significant delays when trying to withdraw their money from the site. Shortly after the withdrawal problems began, several government securities regulators in the United States and Canada issued orders suspending the company’s activity. By May 2023, the Peyton family shut down Novatek and shut down its website, leaving the remaining investors unable to withdraw their money.
The SEC complaint alleges that Novatek and the Peyton family violated the anti-fraud and securities registration provisions of federal securities laws.
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