The agency declared that the defendants had obtained the trust of investors through social media, which they then used to deceive them.
The US Securities and Exchange Commission (SEC) charged five entities and three individuals behind two “relationship investment” scams tied to fake crypto platforms, NanoBit and CoinW6.
The agency revealed on Tuesday that the defendants are accused in the two complaints of luring and misleading investors with social media apps. Before tricking the investors, they were said to have established trust with them. Notably, the SEC is taking legal action against this kind of scam for the first time with these charges.
“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 Grewal, Director at the SEC’s Enforcement Division.
Today we charged multiple entities and individuals in connection with two relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6, respectively. https://t.co/TSNv0X8aN8 pic.twitter.com/cSPhTQt3Aj
— U.S. Securities and Exchange Commission (@SECGov) September 17, 2024
He continued by saying that the scammers are accused by the agency in both instances of building false cryptocurrency ecosystems and giving investors misleading information. He pointed out that the public should be wary of investment offers from strangers on social media as a result of these allegations.
SEC Accuses NanoBit and CoinW6 of Crypto Fraud and Investor Deception
Acting as financial experts on WhatsApp between October 2023 and June 2024, the SEC charges participants in the NanoBit scam of duping investors into funding a phony cryptocurrency platform. Falsely claiming connections to a broker registered with the SEC, NanoBit advertised phony initial coin offerings and embezzled more than $2 million. After that, this was moved to accounts in Hong Kong and used to steal cryptocurrency belonging to investors.
Separately, the SEC claims that CoinW6 scammers pretended to be well-off professionals on Instagram and LinkedIn between July 2022 and December 2023. Through romantic connections on WhatsApp, they allegedly developed trust and persuaded investors to invest in the fraudulent CoinW6 platform by making false claims of daily returns of up to 3%.
Romance Scams Drive Surge in Crypto Fraud, Losses Top $3.5B in 2023
In 2023, romance scams, especially “pig butchering scams,” fueled a sharp rise in illicit crypto activity, according to Chainalysis. Revenues from these scams nearly doubled from the previous year, increasing 85-fold since 2020.
Additionally, the FBI’s Internet Crime Complaint Center reported over 40,000 cases of cryptocurrency fraud, including romance scams, resulting in losses exceeding $3.5b in 2023.