The federal court in New York imposed a fine of over $5 million on four NanoBit-related companies and two individuals who allegedly deceived investors with fake relationships established via WhatsApp. The US Securities and Exchange Commission SEC announced that the decision was made on June 16, and shared the statement regarding the lawsuit process on June 29.
How the fraud scheme works
In the lawsuit filed in September 2024, the SEC described this structure as the first enforcement step against “relationship-based investment fraud” in crypto markets. The institution stated that between September 2023 and June 2024, fraudsters introduced themselves as professionals working in the financial sector in WhatsApp group chats and directed them to NanoBit after gaining the trust of potential investors.
According to the SEC, the defendants gave the impression that NanoBit’s affiliated entity, NanobitUS Securities, was a brokerage firm registered with the institution. False initial coin offerings were introduced on the platform and promises of high returns were highlighted. The SEC noted that there was no actual trading on NanoBit, over $2 million was transferred abroad, and other crypto assets were taken directly from investors and transferred to bank accounts in Hong Kong.
SEC announced that there was no real transaction activity on the NanoBit platform, and the funds collected from investors were directed to accounts abroad.
Penalties imposed by the court
According to court records, NanoBit Limited was awarded $532,649 in restitution, $81,957 in interest, and $1,182,251 in civil fines. Separate fines of $1,182,251 were also imposed on the other three defendants, Zhao Deli, Sweet Karma and Radiant Horizons.
Less consistent but separate sanctions were imposed on two people. Jiajie Liu was ordered to pay a $50,000 fine, $9,485 in interest and $60,603 in restitution. For Hua Zhao, a fine of $50,000, restitution of $4,500 and interest of $704 was issued.
| Accused | Punishment | Return | Interest |
|---|---|---|---|
| NanoBit Limited | $1,182,251 | $532,649 | $81,957 |
| Zhao Crazy | $1,182,251 | Not specified | Not specified |
| Sweet Karma | $1,182,251 | Not specified | Not specified |
| Radiant Horizons | $1,182,251 | Not specified | Not specified |
| Jiajie Liu | $50,000 | $60,603 | $9,485 |
| Hua Zhao | $50,000 | $4,500 | $704 |
The court also permanently enjoined the defendants from further violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934.
Greater control against traps set through social media
In the same period, the SEC also filed a separate lawsuit against CoinW6, which allegedly attracted investors to another fake platform through personal relationships established through Instagram and LinkedIn. Although the method has not changed according to the institution’s approach, the basic order remains the same: First, personal trust is established, then the money is directed to non-existent trading accounts.
SEC’s then-Enforcement Division Director, Gurbir S. Grewal, emphasized that relationship-based investment frauds pose a growing risk for individual investors, especially in crypto assets, and that fraudsters have turned social media into a tool for trust abuse.
The SEC’s Office of Investor Education states that investment decisions should not be based on information from social media group chats. The institution recommends that investors check their registration and authorization through Investor.gov to verify their personal and institution information.
Todd Brody and Jeremy Brandt of the SEC’s New York Regional Office prosecuted the case. The institution’s Cyber and Emerging Technologies Unit also supported the process.
