New York AG sues promoters of two crypto schemes over $1 billion in alleged losses

New York Attorney General Letitia James is suing two companies and their promoters over alleged crypto pyramid schemes, defrauding investors of Haitian descent of more than $1 billion.

In a complaint filed on Thursday, the NYAG alleged defendants Cynthia Petion and her husband, Eddy Petion, among others, defrauded thousands of investors globally, including at least 11,000 New Yorkers, by promoting the schemes.

The first purported crypto mining investment scheme, AWS Mining, with promises of a 200% guaranteed return, collapsed in April 2019. That was followed by a second larger fraud, NovaTech, which claimed to be a crypto and foreign exchange trading platform. Investors deposited over $1 billion worth of cryptocurrency with NovaTech from August 2019 through April 2023, though only $26 million was ever traded on the platform, according to the filing.

Each was described by James as a pyramid scheme, where promoters who invested in the platforms earned cryptocurrency for recruiting others to do the same. NovaTech was also described as a Ponzi scheme, where investors were promised profits from cryptocurrency trading but were paid from the cryptocurrency assets of other investors.

The complaint alleged the defendants carried out the schemes by engaging in an affinity fraud targeting investors of Haitian descent, promoting the schemes to investors in the Creole language and preying on their victims’ religious faith, claiming they were marketed to those who could least afford it by advertising the schemes as a means of “financial freedom.”

In June 2022, the defendants secretly sold their house in Florida and fled to Panama, according to the complaint, allegedly transferring tens of millions of dollars worth of cryptocurrency out of NovaTech. The scheme began to unravel shortly after.

Three UK nationals charged over alleged $2 million Evolved Apes NFT rugpull

Also on Thursday, the U.S. Department of Justice said three UK nationals had been charged with conspiracy to commit wire fraud and money laundering.

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation, announced the unsealing of an indictment against Mohamed-Amin Atcha, Mohamed Rilaz Waleedh and Daood Hassan.

The charges relate to an alleged scheme designed to defraud victims into purchasing NFTs from the Ethereum-based collection Evolved Apes in a 2021 rugpull worth more than $2 million at the time, where the developers advertise a digital project, collect funds from purchasers, then abandon the project and keep the funds.

“As alleged, the defendants ran a scam to drive up the price of digital artwork through false promises about developing a videogame,” U.S. Attorney Williams said in a statement. “They allegedly took investor funds, never developed the game, and pocketed the proceeds. Digital art may be new, but old rules still apply: making false promises for money is illegal. NFT fraud is no game, and those responsible will be held accountable.”

“Ghosting customers without fulfilling a promise not only reflects poor business integrity, it also violates the implicit trust buyers place in sellers when purchasing a product, no matter if that product is in a store or stored on a blockchain,” FBI Assistant Director Smith added. “The FBI remains committed to pursuing those who perpetrate fraudulent schemes out of a selfish desire for a quick profit.”

The charges carry a maximum sentence of 20 years in prison.