SEC closes NanoBit fraud case with $5 million in penalties after default judgment

The operators of NanoBit, a phony cryptocurrency trading platform that the SEC claims was used to defraud investors through made-up relationships on WhatsApp, have been hit with fines exceeding $5 million by a federal court in New York.

According to a litigation release issued by the SEC on June 29, the U.S. District Court for the Eastern District of New York entered a default judgment against four entities and two individuals connected to the scheme on June 16.

The agency’s first enforcement action against “relationship investment scams” in cryptocurrency markets was brought in September 2024.

How the scheme worked

According to the SEC’s initial complaint, fraudsters pretended to be financial industry professionals in WhatsApp group chats between September 2023 and June 2024. They misled investors into believing that NanoBit’s affiliate, NanobitUS Securities, was registered as a broker-dealer with the SEC after gaining the trust of potential victims.

The platform advertised fraudulent initial coin offerings with inflated profits. The SEC claims that there was never any real trading on NanoBit. Rather, more than $2 million was wired overseas, and other cryptocurrency assets were taken straight from investors and transferred to bank accounts in Hong Kong.

Financial penalties are broken down across six defendants

According to the SEC’s filing, the court mandated that NanoBit Limited pay $532,649 in disgorgement, $81,957 in prejudgment interest, and a $1,182,251 civil penalty. Zhao Deli, Sweet Karma, and Radiant Horizons, the other three defendants, all got the same $1,182,251 fines.

Smaller but no less important orders were given to two people. Jiajie Liu owes a $50,000 fine, $9,485 in interest, and $60,603 in disgorgement. Hua Zhao was mandated to pay a $50,000 fine and return $4,500 in disgorgement along with $704 in interest.

Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 prohibit all defendants from ever again violating antifraud provisions.

Part of a broader crackdown on social media investment scams

As Cryptopolitan reported in September 2024, the SEC filed the initial complaint in addition to a separate action against CoinW6, another fraudulent platform that lured victims with romantic relationships cultivated on Instagram and LinkedIn.

Different defendants, same playbook. Build trust through personal connection, then redirect funds into fictitious trading accounts.

Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement at the time, stated, “Relationship investment scams are a growing risk to retail investors,” upon the initial announcement of the charges. “These schemes, especially in the cryptocurrency space, are becoming more common as fraudsters use social media to manipulate and rob investors by taking advantage of trust.”

Investors are advised by the SEC’s Office of Investor Education to use Investor.gov to confirm credentials and to avoid depending on information from social media group chats when making investment decisions.

With assistance from the Division of Enforcement’s Cyber and Emerging Technologies Unit, Todd Brody and Jeremy Brandt of the SEC’s New York Regional Office litigated the case.