The U.S. Securities and Exchange Commission accused two alleged fake crypto platforms, NanoBit and CoinW6, of lying to investors and stealing their money in what the agency says is its first charges alleging this type of scam.
The regulator filed two complaints against five entities and three people on Tuesday in the U.S. District Court for the Eastern District of New York and the U.S. District Court for the Central District of California. Both complaints allege that investors were “solicited” on social media, including through WhatsApp, LinkedIn and Instagram as part of a “relationship investment scam.”
“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 a statement on Tuesday.
Romance scams, a type of confidence scheme sometimes called “pig butchering,” are a growing problem in the crypto industry. By some estimates, victims have been bilked out of $75 billion between 2020 and the beginning of this year. Last week, the Commodity Futures Trading Commission announced it was working with federal and state regulators including the SEC to tackle the increasing threat of these scams.
From October 2023 to June 2024, people pretended to be “financial industry professionals” through WhatsApp groups to get customers to invest through a fake crypto platform called NanoBit.
“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,” the SEC said.
Instead of earning money, investors' funds went to “scheme participants” who then wired more than $2 million to Hong Kong through bank accounts.
As for CoinW6, the SEC says people participating in the scheme pretended to be wealthy and young professionals and connected with victim investors through LinkedIn and Instagram, while also pursuing “romantic relationships over WhatsApp.” The alleged fraudsters said investors could earn as much as 3% return daily from CoinW6's staking, mining and other products.
“In reality, investors' funds were misappropriated, and their ostensible investments, profits and account balances were fictitious,” the SEC said. “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.”
