The U.S. Securities and Exchange Commission (SEC) has secured a significant legal victory, obtaining a $5.5 million default judgment against NanoBit Limited and five affiliated defendants. The ruling, handed down by the U.S. District Court for the Eastern District of New York on June 16, solidifies the regulatory crackdown on fraudulent relationship-investment schemes, commonly referred to as “pig-butchering” scams.
Understanding the NanoBit Fraud Scheme
According to the SEC’s complaint filed in September 2024, the fraudulent operations ran from September 2023 through June 2024. The perpetrators utilized encrypted messaging applications like WhatsApp to build close relationships with potential investors. Posing as seasoned financial industry professionals, the fraudsters gained the trust of their targets before directing them to invest funds into the NanoBit platform.
The platform featured fake user dashboards that simulated active crypto trading and displayed fabricated profits. In reality, no trades were ever executed. The SEC revealed that at least 18 investors fell victim to this scheme, losing approximately $1 million. Instead of funding investments, the assets were diverted directly to bank accounts in Hong Kong. The regulatory agency tracked over $2 million wired offshore, alongside hundreds of thousands of dollars in stolen cryptocurrency assets.
Fines, Penalties, and Legal Consequences
Because the defendants failed to appear in court or present a defense, the federal judge issued a default judgment, characterizing their non-appearance as willful. The court ordered a combined total of $5,518,902 in disgorgement, prejudgment interest, and civil penalties, broken down as follows:
- NanoBit Limited: Ordered to pay over $532,000 in disgorgement, approximately $82,000 in prejudgment interest, and a civil penalty of $1.1 million.
- Corporate Defendants: Radiant Horizons Limited, Sweet Karma Fashion Inc., and Zhao Tropical Deli Inc. are each required to pay $1.1 million in civil penalties.
- Individual Defendants: Jiajie Liu was hit with a $120,000 penalty, while Hua Zhao was ordered to pay $55,000. All payments are due within 30 days.
Additionally, the court has permanently barred all six defendants from participating in future securities offerings and violating federal anti-fraud laws. However, the individuals, Liu and Zhao, retain the right to trade within their personal brokerage accounts.
The Broader Impact on Cryptocurrency Regulation
This ruling marks one of the SEC’s earliest successful enforcement actions specifically targeting relationship-based digital asset scams. It highlights a growing trend of regulators leveraging federal securities laws to combat platforms that fabricate registrations—such as NanoBit’s false claim of SEC registration via “NanobitUS Securities.” By shutting down these operations, the SEC aims to establish clear legal precedents to deter offshore actors exploiting decentralized asset classes.
Frequently Asked Questions
What is a “pig-butchering” crypto scam?
A pig-butchering scam is a relationship-investment fraud where scammers contact targets online, build trust over weeks or months (often via WhatsApp or dating apps), and then convince them to invest in a fake brokerage or cryptocurrency platform. The platform displays fake gains, but users cannot withdraw their funds.
What is a default judgment in an SEC case?
A default judgment occurs when a defendant fails to respond to a lawsuit or appear in court. In SEC enforcement actions, this allows the judge to rule in favor of the SEC, ordering the requested penalties, disgorgement of stolen funds, and permanent bans without a full trial.
How can investors verify if a crypto platform is registered with the SEC?
Investors can verify registrations using the SEC’s publicly accessible Investment Adviser Public Disclosure (IAPD) database or the SEC’s EDGAR system. Fraudulent platforms often falsely claim affiliation with legitimate registered entities to deceive targets.
