By Mark J. Astarita, Esq.
SEC Charges in Crypto Fraud Cases: NanoBit and CoinW6 Scams Unveiled
Despite my decades of representing investors, financial professionals, and their firms, there is a case that surprises me every so often.
This case starts like many others. The SEC filed a case against five entities and three individuals connected to two major cryptocurrency scams. The SEC alleges that these fraudulent operations revolved around fake crypto asset trading platforms, NanoBit and CoinW6, which targeted investors through social media manipulation. The SEC’s swift enforcement highlights the growing risk of crypto-related scams and underscores the need for vigilance.
So far, and unfortunately, nothing out of the ordinary. The allegations include fake crypto platforms, the use of social media to entice investors, and the use of investments for their personal gain.
However, as discussed below, the SEC also alleges that in the CoinW6 case, the scammers not only reached out to potential investors via LinkedIn and Instagram, making all sorts of promises, but they also pursued romantic relationships with victims through WhatsApp!
But wait, there’s more! The SEC alleges that in some cases, when victims threatened to go to law enforcement, the scammers resorted to blackmail, threatening to release compromising romantic communications unless the victims paid more.
As they say, you can’t make this stuff up.
Diving into the SEC’s allegations:
Crypto Scams Targeting Investors on Social Media
In both the NanoBit and CoinW6 cases, social media apps such as WhatsApp, LinkedIn, and Instagram were instrumental in luring victims into the schemes.
The Rise of Fake Crypto Asset Trading Platforms
Fake crypto asset trading platforms are emerging as a preferred method for fraudsters to exploit retail investors. These platforms, like NanoBit and CoinW6, are designed to look legitimate, often featuring fabricated financial data and promises of high returns. However, these are merely facades, with scammers siphoning off investors’ funds for personal gain.
The NanoBit Scam: A Closer Look
How NanoBit Defrauded Investors
From October 2023 to June 2024, participants in the NanoBit scam posed as financial professionals in WhatsApp groups, building trust among potential investors. They directed victims to invest through the fraudulent NanoBit crypto asset trading platform, which claimed to be associated with an SEC-registered broker, NanobitUS Securities.
NanoBit deceived investors with promises of substantial returns through fake initial coin offerings (ICOs). However, the funds never reached legitimate investment vehicles. Instead, over $2 million was wired to offshore accounts in Hong Kong, and additional crypto assets were stolen by the scheme’s participants.
Legal Action Against NanoBit
The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, accuses NanoBit Limited and other affiliated companies, including Radiant Horizons Limited and Sweet Karma Fashion Inc., of violating federal securities laws. The individuals named in the case—Jiajie Liu, Fei Liao, and Hua Zhao—face serious charges, including fraud. The SEC is seeking permanent injunctions, financial penalties, and restitution for the victims of the scam.
The CoinW6 Scam: Romance and Crypto Fraud
Social Media and Romance-Based Crypto Scams
Unlike NanoBit, the CoinW6 scam combined romance fraud with investment deceit. From July 2022 to December 2023, individuals posing as wealthy professionals reached out to potential investors via LinkedIn and Instagram. Once contact was made, they pursued romantic relationships with victims through WhatsApp, gaining their trust before introducing them to the fraudulent CoinW6 trading platform.
Investors were lured into the platform with promises of daily returns of up to 3% from crypto asset staking, mining, and yield farming products. In reality, these investments and profits were fabricated, with the funds being misappropriated by the scammers.
Blackmail and Further Exploitation
When investors attempted to withdraw their profits, the scammers employed various tactics to continue the deception. They claimed that additional payments were needed for taxes or fees, or that the crypto assets were frozen due to law enforcement investigations. In some cases, scammers resorted to blackmail, threatening to release compromising romantic communications unless the victims paid more.
SEC’s Legal Action Against CoinW6
The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges CoinW6 with offering unregistered securities and engaging in fraudulent activities. The SEC is pursuing permanent injunctions, financial penalties, and restitution for affected investors.
Editor’s Note: Readers are reminded that the SEC often over-charges, and ultimately backs away once a target mounts a defense. Unless the release indicates that the respondent has settled the charges, these are the SEC’s allegations, not evidence of wrongdoing. The respondent has not yet had the opportunity to present evidence or to counter the allegations contained in the SEC Press Release.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
