The most famous case recently that I read was the one of NovaTech. There are allegations against this company, scamming people of money, which was received through cryptocurrency. The SEC filed a lawsuit against NovaTech and its promoters over allegedly swindling investors out of nearly $650 million. This scenario tells us how deeply we must be careful with the companies in which we invest.
NovaTech was a pyramid scheme, a fancy way of describing the scam in which money from new investors is used to pay older investors, rather than actually being invested. The SEC claimed that NovaTech used very flowery promises of high returns on investment to attract people, promising to pay 2-3% weekly, but actually investing very little. Instead, the money was used to either pay off earlier investors or was taken by the people running the scheme.
I find it appalling how NovaTech cherry-picked their target demographics, including those who speak Haitian Creole. They dressed up this pitch with religious terminology and personal stories. NovaTech founder Cynthia Petion referred to herself as the "Reverend CEO" and added that God gave her a vision to start the company. It's this type of manipulation that made this scam more attractive and difficult to be critical of.
Troubles began in October 2022 when investors were unable to withdraw their funds. The action precipitated state regulators' involvement in both the US and Canada, issuing orders against NovaTech for it to stop its activities. May 2023 saw the complete shutdown of the company, leaving a lot of investors with no way of getting back their money.
The SEC aims to recover the money from the investors and also seeks punishment for the perpetrators of crime. One of the accused, Martin Zizi, has agreed to pay the fine, though he does not plead guilty to the charges. This story brings to mind clearly the risks associated with investing and how scammers present the opportunity as quite real.
This can definitely act as a lesson.
Before investing in any venture, you have to do your homework and must also be cautious of any deal that gives returns that sound too good to be true. This is the only way of shielding ourselves from falling victim again to this same scam.