The U.S. Securities and Exchange Commission (SEC) has accused two fake cryptocurrency platforms, NanoBit and CoinW6, of defrauding investors through a social media-based “relationship investment scam.” This is the first time the SEC has filed criminal charges related to this type of scam.
The SEC filed two separate complaints today in the U.S. District Courts for the Eastern District of New York and the Central District of California targeting five organizations and three individuals. The complaints allege that investors were lured into fraudulent schemes via social media platforms such as WhatsApp, LinkedIn and Instagram.
“Relationship investment scams, including those involving crypto-asset investments, pose a risk of catastrophic loss to individual investors, and the threat is rapidly increasing as these scams become more popular among fraudsters,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
These scams, often referred to as “romance scams,” have become a growing concern in the crypto industry, with estimates suggesting that victims lost an estimated $75 billion between 2020 and early 2024. Last week, the U.S. Commodity Futures Trading Commission (CFTC) announced that it was collaborating with federal and state regulators, including the SEC, to combat this growing problem.
From October 2023 to June 2024, scammers posed as financial industry professionals in WhatsApp groups and lured victims to invest through a fake platform called NanoBit. NanoBit falsely claimed to be affiliated with NanobitUS Securities, an SEC-registered broker, and promoted fake initial coin offerings promising significant returns. Instead, investor funds were siphoned off by scheme participants who wired more than $2 million to Hong Kong bank accounts.
In the CoinW6 case, the SEC alleges that scammers posed as wealthy young professionals, connecting with victims via LinkedIn and Instagram, and pursuing romantic relationships via WhatsApp. Investors were promised daily returns of up to 3% through CoinW6’s so-called staking and mining products. However, the funds were misappropriated, and the profits and account balances shown to investors were fictitious. When victims tried to withdraw their funds, they were faced with additional fees and told that their assets had been frozen by law enforcement.
*This is not investment advice.