Key Highlights

• The SEC has achieved a final judgment against six defendants involved in the NanoBit cryptocurrency investment fraud.
• This scheme allegedly defrauded over $2 million from investors via a fictitious cryptocurrency trading platform.
• Scammers used WhatsApp groups and social media to attract victims with deceptive investment pitches.

The U.S. Securities and Exchange Commission (SEC) recently received a court ruling against several parties accused of managing a fraudulent cryptocurrency investment involving the misleading platform, NanoBit.

According to a statement from officials, the U.S. District Court for the Eastern District of New York issued default judgments on June 16 against four entities and two individuals implicated in what regulators described as relationship-based crypto investments.

The SEC claimed that this operation stole over $2 million by persuading investors to deposit money into a non-existent trading platform that didn’t carry out any real transactions.

How the Scam Deceived Investors

The fraudulent activities reportedly continued from at least September 2023 to June 2024. The scammers reached out to potential victims through social media and messaging apps, pretending to be financial experts to gain trust, then invited them to a WhatsApp investment group.

Once they established credibility, they urged participants to send money to NanoBit, claiming that it was a legitimate trading platform capable of yielding high returns. The SEC noted that the defendants also touted fake initial coin offerings (ICOs) as exclusive investment prospects promising significant profits.

False SEC Registration Enhanced the Deception

To lend credibility to their scheme, NanoBit allegedly claimed that it was registered with the SEC as a broker-dealer, a statement that was false, according to regulators.

Instead of facilitating transactions, the SEC alleged that investor funds were misappropriated, with over $2 million transferred to bank accounts in Hong Kong, alongside significant amounts of stolen cryptocurrency.

The SEC clarified that “no transactions occurred on the NanoBit platform.”

Court Ordered Significant Financial Penalties

The court has issued a permanent injunction against the defendants, prohibiting them from violating federal securities laws, including those under the Securities Act of 1933 and the Securities Exchange Act of 1934. Additionally, the judgment imposed penalties: NanoBit Limited was required to pay more than $1.79 million in disgorgement, interest, and civil penalties.

Each of the other entities, Radiant Horizons, Sweet Karma, and Zhao Deli, was ordered to pay penalties exceeding $1.18 million, along with obligations to repay illicit gains and pay interest, resulting in total financial judgments surpassing $5 million.

SEC Issues Advisory on Scams

Alongside this enforcement action, the SEC’s Office of Investor Education and Advocacy has issued a caution regarding relationship investment scams that target crypto investors through social networking and messaging apps. The agency advised against solely relying on information found in WhatsApp groups and online investment platforms when making financial decisions.

It also encouraged the public to utilize the SEC’s official Investor.gov database to verify the registration status of investment opportunity providers before parting with any funds.

Growth of Crypto Romance Scams

This situation with NanoBit exemplifies how regulators are intensifying their scrutiny of “relationship investment scams,” often dubbed cryptoromance scams or “pig butchering” scams.

Typically, these schemes involve scammers forming personal connections with victims over weeks or months, ultimately pressuring them to invest through fictitious platforms that showcase false profits, all the while blocking any attempts to withdraw funds.

This incident is reminiscent of several recent cryptoromance scams reported globally. For instance, a woman in New Zealand lost nearly $800,000 when scammers, posing as retired U.S. Army generals, manipulated her over several months into sending virtual currency. Investigators noted that the funds ended up in a cryptocurrency wallet controlled by the fraudsters.

As the popularity of cryptocurrency continues to grow worldwide, regulators have repeatedly warned that scammers are increasingly using social media, encrypted messaging apps, and counterfeit investment platforms to exploit retail investors.