SEC Takes First Enforcement Action Against Multiple Entities in Relationship Investment Scams
The U.S. Securities and Exchange Commission has charged five entities and three individuals in connection with two separate relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6, respectively. The SEC’s two complaints allege that the defendants solicited investors via social media apps, lied to them to gain their trust and confidence, and then stole their money. These charges are the SEC’s first enforcement actions alleging these types of scams.
Both schemes followed a similar pattern: perpetrators used social media platforms like WhatsApp, LinkedIn, and Instagram to establish trust with their victims, targeting retail investors and often feigning romantic interest or professional camaraderie. Once trust was established, the victims were lured into investing in seemingly lucrative crypto ventures, only to discover that the platforms and profits were entirely fictitious.
“Relationship investment scams, including those involving crypto-asset investments, pose a risk of catastrophic harm to retail investors, and the threat is increasing rapidly as these scams become more popular with fraudsters,” said Gurbir S. Grewal, director of the SEC’s enforcement division. “In these two cases, we allege that fraudsters created fake crypto ecosystems that displayed false information to investors. Our allegations serve as a reminder to the public to be on heightened alert about potential scams involving investment opportunities promoted by strangers on social media.”
The SEC’s complaint in SEC v. NanoBit Limited et al. alleges that, from approximately October 2023 to at least June 2024, scheme participants coordinated to defraud at least 18 investors of approximately $967,835 in combined crypto assets and fiat currency. The scheme participants impersonated financial industry professionals in at least seven WhatsApp groups to build investors’ trust and then solicited their investments through the supposed NanoBit crypto asset trading platform.
To persuade investors that the platform was safe, NanoBit allegedly falsely claimed that its affiliate, NanobitUS Securities, was an SEC-registered broker. The supposed financial professionals then touted fake initial coin offerings as a way for the investors to make substantial returns. As alleged, however, the NanoBit platform was fake, and investors’ funds actually went to scheme participants who wired more than $2 million to bank accounts in Hong Kong and misappropriated hundreds of thousands of dollars’ worth of investors’ crypto assets.
The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, charges NanoBit Limited, Radiant Horizons Limited, Sweet Karma Fashion Inc., Zhao Tropical Deli Inc., Jiajie Liu, Fei Liao, and Hua Zhao with violating the antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each defendant.
Separately, the SEC’s complaint in SEC v. CoinW6 alleges that, from approximately July 2022 to at least December 2023, scheme participants who purported to be young, wealthy professionals contacted prospective investors via LinkedIn and Instagram and pursued romantic relationships over WhatsApp. Scheme participants gained investors’ trust and then convinced them to open accounts on CoinW6’s supposed crypto asset trading platform. As alleged, the schemers claimed that investors could earn up to a 3% daily return from CoinW6’s crypto asset staking, mining, and yield farming products.
In reality, the CoinW6 platform, including any apparent investments, profits, or account balances, was entirely fictitious, and investors’ funds were misappropriated. The scheme participants even utilized a fake customer service entity to further perpetuate the illusion of a legitimate platform and provide excuses for withdrawal delays. When investors tried to withdraw their purported profits, the schemers allegedly demanded additional payments for taxes or fees, told investors that the crypto assets were frozen as part of a law enforcement inquiry, or tried to blackmail them using compromising romantic communications over WhatsApp.
The SEC’s complaint, filed in U.S. District Court for the Central District of California, charges CoinW6 with offering and selling securities in unregistered offerings and with violating the antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against CoinW6.
These cases underscore the importance of investor vigilance in the face of increasingly sophisticated online scams.
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