The U.S. Securities and Exchange Commission (SEC) has charged five entities and three individuals tied to fraudulent crypto schemes involving NanoBit and CoinW6, both fake crypto trading platforms.
The scammers solicited investments through social media apps, tricking victims into handing over a lot of money that were then stolen. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said:
“Relationship investment scams are a growing risk to retail investors. These schemes, particularly in the crypto space, are becoming more common as fraudsters exploit trust through social media to manipulate and rob investors.”
The scammers pretended to be financial professionals in WhatsApp groups to lure investors into their trap.
They marketed the NanoBit platform as a legitimate crypto asset trading operation, even falsely claiming that NanobitUS Securities was an SEC-registered broker.
Investors were further duped by promises of lucrative returns through fake initial coin offerings (ICOs). NanoBit was described as a safe, profitable opportunity, but it was nothing more than a shell for fraud.
The SEC alleges that, instead of investing funds, the scammers redirected over $2 million to Hong Kong-based bank accounts and pocketed hundreds of thousands of dollars’ worth of crypto assets.
“Fraudsters sometimes pay others — for example, actors to pose as ordinary people turned millionaires, social media influencers, and celebrities — to tout an investment on social media or in a video.”
– SEC
The entities and individuals charged in the NanoBit case are NanoBit Limited, Radiant Horizons Limited, Sweet Karma Fashion Inc., Zhao Tropical Deli Inc., Jiajie Liu, Fei Liao, and Hua Zhao.
They are accused of violating the antifraud provisions of federal securities laws. The SEC wants permanent injunctions, disgorgement (to return the money stolen), and civil penalties.
CoinW6’s fraud took a different approach, blending romance with financial fraud.
The SEC’s complaint, filed in the U.S. District Court for the Central District of California, alleges that from July 2022 to December 2023, the CoinW6 team targeted victims on LinkedIn and Instagram.
“No matter how trustworthy someone might seem, don’t make investment decisions based on the advice of anyone who makes unsolicited contact with you online or through an app or text message. Do your own independent research and ask questions.”
– SEC
These scammers posed as young, wealthy professionals and built romantic relationships with their targets over Instagram.
Once trust was established, the scammers convinced investors to open accounts on CoinW6.
The fraudsters promised investors that they could earn returns of up to three percent daily through crypto asset staking, mining, and yield farming.
But of course the investors’ money was never used in legitimate crypto ventures. Instead, their funds were stolen, and the returns shown on their account balances were pure fiction.
When investors tried to withdraw funds, the scammers hit them with demands for additional payments, allegedly for taxes and fees.
In some cases, the fraudsters claimed the crypto assets were frozen by law enforcement.
“Fraudsters might also use altered or AI-generated photos or videos to make it falsely look like others have profited. For example, depictions of skyrocketing account balances often are fake. The potential for high investment returns usually involves high risk.”
– SEC
They even resorted to blackmail, threatening to expose compromising personal communications exchanged during their romantic pursuits.
CoinW6’s charges include offering and selling securities in unregistered offerings, alongside violations of the antifraud provisions of federal securities laws.
In light of this development, the SEC’s Office of Investor Education and Advocacy, in collaboration with the Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), and the North American Securities Administrators Association (NASAA), has released a new Investor Alert.
