SEC Charges Multiple Individuals and Entities in Its First Action Against Crypto Relationship Investment Scams

The U.S. Securities and Exchange Commission (SEC) filed complaints in the U.S. District Court for the Eastern District of New York, charging NanoBit Limited, Radiant Horizons Limited, Sweet Karma Fashion Inc., Zhao Tropical Deli Inc., Jiajie Liu, Fei Liao, and Hua Zhao with two 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.

From approximately October 2023 to at least June 2024, scheme participants impersonated financial industry professionals in 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 in fact 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 also filed charges against CoinW6, alleging 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 three percent return per day from CoinW6’s crypto asset staking, mining, and yield farming products. In reality, investors’ funds were misappropriated, and their ostensible investments, profits, and account balances were fictitious. 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.

“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 Division of Enforcement. “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.”