On June 6, New York Attorney General (AG) Letitia James filed suit against NovaTech Advisors, LLC, AWS Mining Pty Ltd., and several other entities, alleging the defendants orchestrated two consecutive, fraudulent cryptocurrency schemes that largely targeted Haitian nationals. Defendants Cynthia Petion and Eddy Petion allegedly defrauded investors of tens of millions of dollars by promising large returns in WhatsApp group chats and social media advertisements in Haitian creole by appealing to religious beliefs. The action highlights the regulation-by-enforcement nature of the cryptocurrency industry, and underscores the need for comprehensive, consistent regulation.

According to the AG, the Petions initially recruited investors on behalf of AWS Mining, an Australian entity, by promising investors up to 20% monthly returns, and by providing bonuses for recruiting other investors. The scheme purported to generate returns by engaging in cryptocurrency mining. However, in April 2019, AWS Mining informed investors that it had terminated “unprofitable” mining contracts, stopped making monthly payments, and refused to return investors’ principal.

Once AWS Mining collapsed in 2019, the individual defendants allegedly founded NovaTechFX, a bitcoin trading firm which utilized a similar pyramid scheme structure. The scheme allegedly recruited many of the initial AWS Mining investors. Leveraging religious tropes across social media platforms, the individual defendants recruited more than 200,000 investors, who collectively transferred more than $1 billion in cryptocurrency to NovaTechFx. According to the complaint, NovaTechFx only invested $26 million of investors’ money, and fabricated profits by paying earlier investors with funds from new investors.

In February 2022, cryptocurrency platform Gemini alerted customers who used its platform that it believed NovaTechFx was a Ponzi scheme. Gemini froze assets to and from NovaTechFx while Canadian and state securities regulators brought enforcement actions against NovaTechFx. The AG’s complaint alleges 10 causes of action, including securities fraud under the Martin Act, failure to register, engaging in illegal pyramid and Ponzi schemes, and repeated and persistent fraud and illegality. The suit further alleges that the defendants engaged in the offering and sale of unregistered securities.

Why It Matters

This case serves as a reminder that regulating cryptocurrency is one of the top priorities of the New York AG’s office. While AG James had previously proposed the CRPTO Act, which would have allowed the AG to enforce regulations specific to cryptocurrency, no comprehensive regulations have been enacted in New York. In the absence of regulations, state AGs and other regulators are left with no choice but to regulate cryptocurrency by enforcing general state business laws. New York’s action against NovaTechFx is one of many actions over the last several years by state AGs and federal regulators aiming to curtail illegal practices in the cryptocurrency industry.

Additional articles on state AG offices in the financial services space include:

Troutman Pepper State Attorneys General Team

Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
Clay Friedman – Co-leader
Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation.
Judy Jagdmann
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen Piepgrass
Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries.
Michael Yaghi
Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues.
Samuel E. “Gene” Fishel
Gene is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) practice, based in the Richmond office. He brings extensive regulatory experience, having most recently served as senior assistant attorney general and chief of the Computer Crime Section in the Office of the Attorney General of Virginia, and as special assistant U.S. attorney in the Eastern District of Virginia for 20 years.
Tim Bado
Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others.
Chris Carlson
Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Blake R. Christopher
Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries.
Natalia Jacobo
Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work.
Namrata Kang
Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising.
Michael Lafleur
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan Nikdel
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes.
John Sample
John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims.
  Whitney Shephard
Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey Smith
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation.
Daniel Waltz
Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom.
Stephanie Kozol
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.