SEC Charges Multiple Individuals and Entities in Relationship Investment Scams

Washington, D.C.--(Newsfile Corp. - September 17, 2024) - The Securities and Exchange Commission today charged five entities and three individuals in connection with two relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6, respectively. The SECs 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 SECs first enforcement actions alleging these types of scams.

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 SECs 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.

The SECs complaint in SEC v. NanoBit Limited et al. alleges that, 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 SECs 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 SECs 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 CoinW6s supposed crypto asset trading platform. As alleged, the schemers claimed that investors could earn up to a three percent return per day from CoinW6s 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.

The SECs 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.

The SECs investigation regarding NanoBit was conducted by Jeremy Brandt, Michael DiBattista, and Neil Hendelman of the New York Regional Office and was supervised by Rebecca Reilly and Sheldon L. Pollock. The litigation is being conducted by Todd Brody and Jeremy Brandt and supervised by Alexander Vasilescu.

The SECs investigation regarding CoinW6 was conducted by Matthew B. Reisig and was supervised by Timothy N. England and Melissa Hodgman. The litigation is being conducted by David Nasse and Matthew B. Reisig. The SEC appreciates the assistance of the Monetary Authority of Singapore in this investigation.

The SECs Office of Investor Education and Advocacy, in collaboration with the CFTCs Office of Customer Education and Outreach, FINRA, and NASAA, has issued an Investor Alert about these scams, warning that fraudsters may reach out to investors and slowly build trust before convincing them to invest their money and then defrauding them through fake investments.

The SEC encourages investors to check the backgrounds of anyone selling or offering them an investment using Investor.gov.

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