1. NovaTech fraud case: what New York is demanding
New York Attorney General Letitia James is asking a court for $1.3 billion in damages from Cynthia and Eddy Petion, the founders of the crypto trading platform NovaTechFx, according to an announcement made on October 23, 2026. The demand follows a default judgment entered in August 2025, after the couple left the United States and did not appear in court. Prosecutors allege the NovaTech fraud drained more than $1 billion from investors before it collapsed in 2023.
The figure is far larger than the amount prosecutors say investors originally deposited, which signals that the state is seeking a sum meant to cover the alleged losses of victims and additional monetary relief on top. The allegations described in this article come from the attorney general's complaint and have been presented by prosecutors; the founders did not answer them in court.
The case is one of the largest crypto fraud actions brought by a single US state. It also illustrates a recurring problem for regulators: winning a judgment against defendants who are no longer within reach is not the same as recovering money for victims.
2. What is a default judgment, and why did it come about?
A default judgment is a ruling a court issues in favor of the party that brought a case when the other side fails to respond or show up. In civil litigation, defendants are given a set period to answer a complaint and are expected to attend hearings. If they do neither, a judge can accept the plaintiff's version of events for the purposes of the case and move on to deciding what relief to award.
In this matter, the court entered the default judgment in August 2025. The reason was that the Petions departed the United States and did not take part in the proceedings. The ruling settled the question of liability in the state's favor, leaving the amount of money the founders must pay as the remaining issue. The $1.3 billion request addresses that second step.
A default judgment does not require prosecutors to prove their case through a contested trial, but a court still has to be persuaded that the damages being requested are justified. That is why the attorney general's filing sets out the scale of the alleged scheme in detail, from the amount deposited to the number of people affected.
3. How prosecutors say the scheme worked
According to the allegations, NovaTech collected more than $1 billion in digital asset deposits between August 2019 and April 2023. Prosecutors say that only about $26 million of that money was ever actually traded on the platform. The rest, in their account, did not go toward the trading activity that investors were told would produce their returns.
Prosecutors further allege that returns paid to earlier investors came out of the deposits of newer participants. That pattern is the defining feature of a Ponzi scheme: payouts to existing members are funded by fresh money from new ones rather than by genuine profits. Such arrangements can appear to work for years, because early participants receive what looks like steady income and tend to recruit friends and relatives. They fail once new deposits slow down and withdrawal requests outrun incoming funds.
NovaTech collapsed in May 2023, according to the allegations, and investors were locked out of their accounts. For depositors, that meant digital assets they believed they could withdraw were no longer accessible.
4. The link to AWS Mining
Prosecutors say the Petions were connected to an earlier venture, AWS Mining, a crypto mining scheme that collapsed in 2019. NovaTech, in this telling, appeared to start up shortly afterward, which suggests a continuation of similar activity under a new name. Pairing the two companies in a single case allowed the state to describe a longer pattern of conduct rather than one isolated failure.
The lawsuit was filed on June 6, 2024. It names NovaTechFx, AWS Mining, the Petions and associated entities as defendants. Naming the related entities matters in fraud cases of this type, because money in such schemes is often moved between companies, and a judgment limited to one firm can be hollow if its assets have been shifted elsewhere.
5. Who was affected
The complaint alleges that the scheme operated as an illegal pyramid and Ponzi arrangement and reached more than 200,000 investors worldwide. Of those, more than 11,000 are described as living in New York, which gave the state its jurisdictional footing to sue.
Prosecutors also allege that recruitment relied heavily on personal networks. They say organizers targeted Haitian and immigrant communities and spread the pitch through social networks and religious gatherings. This style of recruitment, often called affinity fraud, depends on trust inside a community: people are more likely to join an investment when it is recommended by someone they know and respect, and they are less likely to question the claims being made.
The reliance on word of mouth also explains how a scheme can grow to a very large number of participants without traditional advertising. Each early investor becomes a de facto promoter, and the structure expands along existing social ties.
6. The legal tool: New York's Martin Act
New York's attorney general has an unusually strong instrument for cases of this kind in the Martin Act, the state's securities fraud law. Under it, the attorney general can pursue securities fraud without having to prove that the defendants intended to deceive anyone. That is a lower bar than prosecutors face in a federal criminal case, where intent is typically a central element.
The law has long made the New York attorney general's office one of the most active state-level enforcers in financial markets. Its reach is particularly relevant for crypto, where questions about whether a given token or investment product counts as a security have often been disputed. When a scheme promises returns from pooled funds and a promoter's efforts, the state can argue that it falls within the statute regardless of the technology involved.
7. Can a $1.3 billion judgment actually be collected?
Collecting on the judgment will be difficult. Because the Petions have left the country, they are outside the immediate jurisdiction of US courts, and enforcing a New York judgment against people and assets located abroad generally requires cooperation from foreign authorities or separate legal proceedings in the countries where the defendants live or hold property. That process can be slow, costly and uncertain.
The case therefore highlights what many observers describe as a gap in the enforcement of crypto fraud rulings. Digital assets can be moved across borders quickly, and defendants can relocate. Investigators may need to trace funds across multiple blockchains and exchanges before identifying anything that can be seized. A judgment is a legal finding, not a deposit into victims' accounts, and the distance between the two can be wide.
The size of the claim compared with the scale of potential recovery also matters. A judgment of $1.3 billion far exceeds what is likely to be found, and any money that is eventually secured would typically be distributed according to a court-approved process rather than returned in full to everyone affected.
8. Why Ponzi structures are hard to spot from the inside
Schemes built on this model are difficult for ordinary participants to identify, because the early evidence looks reassuring. Investors see balances rise on a dashboard, receive payments on schedule and hear success stories from people they know. None of that proves that real trading is taking place. The gap between the money deposited and the money actually put to work, which prosecutors place at more than $1 billion against about $26 million in this case, is precisely the kind of detail that outsiders cannot see until an investigation reveals it.
Regulators commonly advise caution when a platform promises steady returns regardless of market conditions, when withdrawals are discouraged or delayed, or when recruiting new members is rewarded. Crypto adds a further layer of difficulty, since deposits made in digital assets may be held in wallets that investors cannot independently inspect, and the platform's account of what it holds is often the only information available to them.
9. What the case shows about state-level enforcement
State attorneys general have increasingly taken on crypto cases of their own, partly because their statutes allow them to act quickly on behalf of residents. In this matter, the more than 11,000 New York investors among the alleged victims gave the office both the standing and the motivation to sue, even though the scheme itself is described as global in reach.
The outcome also shows how procedure shapes results. The state obtained a finding of liability because the defendants did not appear, but the harder work of turning that finding into money for victims begins only after the judgment is final. Tracing, freezing and seizing assets are separate efforts, and each depends on where the assets sit and which authorities are willing to help. For the thousands of people who deposited funds with NovaTech, the legal victory is a necessary step, though not by itself a remedy.
10. What happens next
The next step is for the court to act on the attorney general's request for $1.3 billion. If the judge grants it, the amount would become the formal monetary judgment against the Petions, and the state could begin pursuing assets wherever they can be located. No date for a ruling on the damages request was given in the announcement.
For investors who lost money, the practical questions are whether any assets can be found and how any recovery would be shared. For regulators and policymakers, the matter adds to a broader debate over how to build international cooperation strong enough to follow crypto fraud proceeds beyond national borders. The outcome here will serve as an indication of how far state enforcement can reach when defendants choose not to appear.