The U.S. Securities and Exchange Commission (SEC) has charged five entities and three individuals with two counts of “relationship investment” fraud linked to fake cryptocurrency platforms, NanoBit and CoinW6.
The agency announced Tuesday that the two complaints allege that the defendants used social media applications to lure and deceive investors. They built investor confidence before defrauding them. Interestingly, the allegations are the SEC’s first enforcement actions against this type of fraud.
“Relational investment fraud, including those involving investments in crypto assets, poses a risk of catastrophic harm to retail investors, and the threat is growing rapidly as these scams become increasingly popular among fraudsters,” – Gurbir Grewal, director in the SEC ‘ s Enforcement Division , said.
He added that in both cases, the agency accuses fraudsters of creating fake cryptocurrency ecosystems and providing false information to investors. These accusations, he noted, are a warning to the public to be wary of investment offers from strangers on social media.
SEC accuses NanoBit and CoinW6 of cryptocurrency fraud and misleading investors
The SEC accuses participants in the NanoBit scam of impersonating financial experts on WhatsApp from October 2023 to June 2024 to deceive investors and force them to fund a fake cryptocurrency platform. NanoBit falsely claimed to have ties to an SEC-registered broker and promoted fake initial coin offerings, appropriating more than $2 million. These were then transferred to accounts in Hong Kong and used to steal investors’ cryptocurrencies.
Separately, from July 2022 to December 2023, the SEC says the CoinW6 scammers impersonated wealthy professionals on LinkedIn and Instagram. They were supposed to build trust through romantic calls on WhatsApp, convincing investors to invest money in the fake CoinW6 platform by making false promises of daily returns of up to 3%.
According to Chainalysis, in 2023, romance scams, especially “pig slaughter scams,” caused a surge in illegal cryptocurrency activity. Revenue from these scams nearly doubled compared to the previous year, increasing 85-fold from 2020.
In addition, the FBI’s Internet Crime Reporting Center reported more than 40,000 cases of cryptocurrency fraud, including romance scams, resulting in losses exceeding $3.5 billion in 2023.
