SEC Charges Multiple Individuals and Entities in Relationship Investment Scams

On September 17, 2024, the Securities and Exchange Commission (the “SEC“) charged five entities and three individuals in connection with two relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6, respectively. The SEC’s two complaints allege that the schemers used WhatsApp, LinkedIn, and Instagram to gain the trust and confidence of the victims before luring them to fake crypto asset trading platforms and stealing their money. These charges are the SEC’s first enforcement actions alleging these types of scams.

The SEC’s complaint in SEC v. NanoBit Limited et al. alleges that, from approximately October 2023 to at least June 2024, scheme participants defrauded at least 18 investors out of approximately $967,835 by impersonating 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 the money received by the investors to bank accounts in Hong Kong and misappropriated hundreds of thousands of dollars worth of investors’ crypto assets.

The SEC’s complaint, filed in the 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 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. All total, the SEC alleges that the scheme participants defrauded at least 11 investors out of more than $2.2 million.

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.