The U.S. Securities and Exchange Commission (SEC) has won a major legal victory against digital asset fraud. A federal judge in the U.S. District Court for the Eastern District of New York entered a default judgment totaling $5,518,902 against NanoBit Limited and five affiliated defendants. The ruling concludes a civil enforcement action targeting a highly structured “pig-butchering” scheme that defrauded retail investors through a simulated cryptocurrency trading platform.
The Anatomy of the NanoBit Scam
According to the SEC’s complaint, the fraudulent operation ran from September 2023 through June 2024. Scheme participants systematically targeted victims by posing as affluent financial-industry professionals in WhatsApp messaging groups. Over weeks of communication, the actors built close personal relationships with investors before soliciting capital for the NanoBit platform.
Once victims deposited fiat currency or crypto assets, the platform generated fake user dashboards displaying simulated, highly profitable trades to encourage further deposits. In reality, no actual cryptocurrency transactions were executed. Instead, the participants misappropriated at least $1 million from 18 retail investors. The funds were quickly diverted to bank accounts in Hong Kong, with over $2 million wired offshore and hundreds of thousands of dollars in crypto assets pocketed directly by the scheme’s operators. To legitimize the fraud, NanoBit falsely claimed its affiliate, NanobitUS Securities, was registered with the SEC and associated with reputable financial institutions.
Breakdown of Financial Penalties and Legal Rulings
On June 16, the court ordered a combined $5,518,902 in disgorgement, prejudgment interest, and civil penalties. Because the defendants failed to appear in court, the judge ruled the default as willful. The financial liabilities are distributed as follows:
- NanoBit Limited: Ordered to pay over $532,000 in disgorgement, approximately $82,000 in prejudgment interest, and a $1.1 million civil penalty.
- Radiant Horizons Limited, Sweet Karma Fashion Inc., and Zhao Tropical Deli Inc.: Each entity is hit with a $1.1 million civil penalty.
- Jiajie Liu: Fined a $120,000 civil penalty.
- Hua Zhao: Fined a $55,000 civil penalty.
All defendants must settle these penalties within 30 days. Additionally, the court has issued permanent injunctions barring all six defendants from future violations of federal anti-fraud laws and from participating in securities offerings. However, individuals Liu and Zhao retain the right to trade securities within their personal accounts.
Regulatory Context and the Rise of Relationship Scams
This case represents a milestone in the SEC’s efforts to police cross-border retail investment scams. Filed originally in September 2024, the action against NanoBit was launched alongside a parallel case against another fraudulent platform, CoinW6. These actions represent the agency’s initial wave of enforcement explicitly targeting relationship-investment schemes, which have proliferated globally. A seventh defendant named in the initial complaint, Fei Liao, was not subject to this specific default judgment.
Frequently Asked Questions
What is a “pig-butchering” financial scam?
A relationship-investment scam, often called “pig-butchering,” involves fraudsters building trust with victims over messaging apps (like WhatsApp) before directing them to invest in fake platforms. The name refers to “fattening up” the victim with simulated profits before stealing the entire investment.
How can investors verify if a crypto platform is SEC-registered?
Investors can verify registration status using the SEC’s EDGAR database or the Investment Adviser Public Disclosure (IAPD) portal. Fraudulent platforms often display fake credentials or clone the details of legitimate firms.
What happens when a defendant receives a default judgment?
A default judgment is issued when a defendant fails to appear in court or defend themselves. The court rules in favor of the plaintiff (in this case, the SEC) and mandates the payment of disgorgement, interest, and penalties as requested.
