Crypto investors lost nearly $1 million as part of an international scheme involving fraudsters posing as managing directors at fake global investment firms in WhatsApp group chats, according to new SEC charges.
The SEC Enforcement Division unveiled the cases Tuesday, marking the first two enforcement actions alleging relationship investment scams. SEC Enforcement Director Gurbir Grewal said these kinds of scams posed “a risk of catastrophic harm” to retail investors as they become more popular with criminals.
In SEC v. NanoBit Limited et al, the commission argued that schemers impersonated financial industry professionals and encouraged victims to trade on fraudulent crypto platforms between October 2023 and June of this year. Starting in 2023, the defendants solicited NanoBit investors to join several WhatsApp groups featuring financial advice from purported industry professionals. (NanoBit was incorporated in 2023 in Colorado, and its officers or managers remain unknown, according to the SEC.)
In one instance, investors were invited to a WhatsApp group led by a supposed managing director and head of global research and investment strategy at a global investment firm. While someone with that name worked at the firm in question, the person on the WhatsApp group was an impostor.
The “pseudo-director” made recommendations on equity securities, which were supported by his assistant and several other members of the WhatsApp chat; according to the SEC, all are believed to have been part of the scheme.
Having built support from investors, in November, several defendants impersonating investment professionals urged participants on the channel to create accounts and trade on the NanoBit platform, even promising money investors could trade with by logging in regularly.
According to the commission, the platform presented an interface seemingly offering trading in dozens of crypto assets and allowed investors to view their alleged account balances.
“In reality, there is no evidence that a crypto asset trading platform existed and no evidence that any transactions were executed on the NanoBit Platform,” the complaint read.
The platform also held out that its “affiliate,” NanobitUS Securities, was an SEC-registered broker and was affiliated with NASDAQ and Apex Clearing, which were all false claims, according to the SEC. To bag larger investments, the schemers promoted several fake initial coin offerings, including Cosmic Energy and VTrade. NanoBit went as far as to give out counterfeit whitepapers for the ICOs, downloadable through the platform.
However, some investors eventually grew suspicious.
One unnamed investor sent WhatsApp messages to customer support reps (who were really participants in the scheme) when he couldn’t make a withdrawal. Before the withdrawal could be processed, he was told he owed $10,692 in what they called “Ghana miners fees."
According to the complaint, he was kicked out of the WhatsApp group when he accused NanoBit of being an illegitimate business. Similarly, other investors were removed when they demanded that NanoBit process their withdrawals.
During this time, defendants spent more than $2 million in foreign wires to bank accounts in Hong Kong held by various companies incorporated there, including funds from investors. A debit card tied to one of the companies named as a defendant was used to purchase concert tickets, meals and on charter flights.
In one case, the SEC claimed Zhao Tropical Deli (which is ostensibly a Hong Kong-based grocery story), received $188,633.80 in “nondescript incoming wire transfers.” Defendants also sent investors’ funds to unhosted crypto addresses.
The NanoBit platform shut down in June; while some investors received “small transfers” of crypto assets after requesting withdrawals, the SEC expected the fraudsters to do so to “legitimize” the scheme.
In all, about $7.2 million in crypto assets were transacted during the course of the scheme. At least 18 investors lost about $967,835 in crypto assets and other currency. The commission speculated that the defendants appeared to be part of a “larger group engaging in ongoing frauds of a similar nature.”
In the other case involving the alleged fake platform CoinW6, the commission alleged that the schemers claimed to be “young, wealthy professionals” who reached out to victims over Instagram and LinkedIn and drew them into romantic relationships via WhatsApp.
They claimed that investors could get a 3% return per day from the platform, but investors’ funds were misappropriated. According to the commission, when they tried to get the money or profits back, the fraudsters told investors their funds were held up because of law enforcement investigations. Some of the schemers even tried to blackmail investors with “compromising” romantic conversations from WhatsApp, according to the SEC.
