Federal Court Orders $5.5 Million Penalty for NanoBit Scam
A federal judge in the U.S. District Court for the Eastern District of New York has entered a default judgment totaling $5,518,902 against NanoBit Limited and five affiliated defendants. The judgment follows allegations by the U.S. Securities and Exchange Commission (SEC) that the group operated a fraudulent relationship-investment scheme, commonly known as a pig-butchering scam, utilizing a counterfeit cryptocurrency trading platform.
The SEC announced the court order, which includes combined disgorgement, prejudgment interest, and civil penalties, on June 16. The defendants named in the enforcement action include NanoBit Limited, Radiant Horizons Limited, Sweet Karma Fashion Inc., Zhao Tropical Deli Inc., Jiajie Liu, and Hua Zhao. None of the defendants appeared in court to contest the charges, leading the judge to rule the default as willful.
How the NanoBit Relationship-Investment Scheme Operated
According to the SEC complaint filed in September 2024, the scheme active from September 2023 to June 2024 targeted retail investors through WhatsApp communication groups. Scheme participants posed as financial-industry professionals to build trust with targeted users over weeks or months. Once relationship trust was established, investors were guided to create accounts and deposit funds into the NanoBit platform.
To keep investors engaged and encourage larger deposits, the platform utilized fake trading dashboards. These dashboards displayed fabricated, highly profitable trades. However, the SEC alleged that NanoBit never executed any actual cryptocurrency transactions. Instead of trading, the group misappropriated at least 18 investors’ funds, routing nearly $1 million in crypto and fiat assets to banking institutions in Hong Kong. The SEC tracked over $2 million wired offshore alongside hundreds of thousands of dollars in stolen crypto assets.
Penalties and Regulatory Injunctions
To deceive investors, NanoBit falsely claimed that an affiliate named NanobitUS Securities was registered with the SEC and associated with top-tier financial firms. Under the final court judgment, the defendants face severe financial penalties and industry bars:
- NanoBit Limited: Ordered to pay over $532,000 in disgorgement, approximately $82,000 in prejudgment interest, and a $1.1 million civil penalty.
- Corporate Defendants: Radiant Horizons Limited, Sweet Karma Fashion Inc., and Zhao Tropical Deli Inc. are each ordered to pay $1.1 million in civil penalties.
- Individual Defendants: Jiajie Liu must pay $120,000, and Hua Zhao must pay $55,000. All payments are due within 30 days of the judgment.
- Permanent Injunctions: All six defendants are permanently barred from violating federal anti-fraud provisions and participating in securities offerings. However, Liu and Zhao retain the right to trade within their personal brokerage accounts.
The action against NanoBit, alongside a parallel case targeting a platform called CoinW6, represents the SEC’s initial wave of enforcement actions targeting relationship-based cryptocurrency investment fraud. A seventh defendant in the original complaint, Fei Liao, was not included in this default judgment.
Frequently Asked Questions (FAQ)
What is a relationship-investment or “pig-butchering” scam?
A relationship-investment scam, often called “pig-butchering,” involves fraudsters building trust with victims over time via messaging apps like WhatsApp or social media. Once trust is established, the scammers convince the victim to invest in a fraudulent platform, using fake metrics to show artificial gains before stealing the deposited assets.
What is a default judgment in a financial lawsuit?
A default judgment is a binding ruling made by a judge when one party fails to appear in court or defend themselves against legal charges. In this case, because the NanoBit defendants did not respond to the SEC’s complaint, the court ruled in favor of the SEC and mandated the requested financial penalties.
How can investors verify if a crypto platform is registered with the SEC?
Investors can verify registration status by checking the SEC’s public database, EDGAR (Electronic Data Gathering, Analysis, and Retrieval), or via the Investment Adviser Public Disclosure (IAPD) website. Legitimate securities firms must file regular disclosures that are accessible to the public.
