Five entities and three individuals have been accused by the US Securities and Exchange Commission (SEC) of the operation of two “relationship investment” scams associated with fictitious crypto platforms, NanoBit and CoinW6.
The agency disclosed on Tuesday that the two complaints contend that the defendants employed social media applications to deceive and attract investors. It is purported that they established trust with the investors before defrauding them.
It is important to note that these allegations are the SEC’s initial enforcement actions against this scam.
According to Gurbir Grewal, Director of the SEC’s Enforcement Division, “Relationship investment scams, including those that involve crypto-asset investments, pose a risk of catastrophic harm to retail investors. The threat is increasing rapidly as these scams become more popular with fraudsters.”
He further stated that the agency accuses the fraudsters of establishing deceptive crypto ecosystems and disseminating false information to investors in both instances.
He observed that these allegations should serve as a cautionary tale to the public regarding investment proposals from strangers on social media.
From October 2023 to June 2024, the SEC alleges that NanoBit scheme participants falsely represented themselves as financial experts on WhatsApp to defraud investors into funding a fraudulent cryptocurrency platform.
NanoBit misappropriated over $2 million by fraudulently claiming affiliations with an SEC-registered broker and promoting fraudulent initial coin offerings. This was subsequently transferred to Hong Kong accounts and utilized to take investors’ cryptocurrency.
The SEC alleges that CoinW6 scammers posed as affluent professionals on LinkedIn and Instagram from July 2022 to December 2023. Separately, an allegation was made.
They purportedly established trust through romantic connections on WhatsApp, persuading investors to invest in the fictitious CoinW6 platform with fraudulent assurances of up to 3% daily returns.
According to Chainalysis, illicit crypto activity experienced a significant increase in 2023 due to romance hoaxes, particularly “pig butchering scams.” Since 2020, these schemes have increased their revenue 85 times, nearly doubling it from the previous year.
Additionally, the FBI’s Internet Crime Complaint Center reported more than 40,000 instances of cryptocurrency fraud, which included romance scams and resulted in losses eclipsing $3.5 billion in 2023.
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