A federal judge in the U.S. District Court for the Eastern District of New York has finalized a $5.5 million default judgment against NanoBit Limited and five affiliated defendants. The judgment concludes an enforcement action by the U.S. Securities and Exchange Commission (SEC) targeting a sophisticated relationship-investment scheme, commonly known as a “pig-butchering” scam, which operated via a fraudulent cryptocurrency trading platform.
The Mechanics of the NanoBit Cryptocurrency Fraud
According to the SEC’s complaint, the fraudulent operation spanned from September 2023 to June 2024. The scheme utilized WhatsApp groups, where participants masqueraded as seasoned financial-industry professionals. By offering investment advice and building interpersonal trust with retail investors, they systematically coaxed victims into depositing fiat and cryptocurrency onto the NanoBit platform.
To keep the deception alive, NanoBit provided users with personalized digital dashboards. These dashboards falsely displayed highly profitable cryptocurrency trades and growing account balances. In reality, the platform executed no actual trades. Instead, the SEC revealed that the defendants redirected investor funds to offshore bank accounts in Hong Kong, laundering over $2 million and misappropriating hundreds of thousands of dollars in crypto assets. At least 18 retail investors fell victim to this scheme, losing approximately $1 million in personal capital.
Default Judgments and Civil Penalties Breakdown
Because the defendants failed to appear in court to defend themselves, the judge entered a default judgment, finding the violations willful. In total, the court ordered $5,518,902 in combined disgorgement, prejudgment interest, and civil penalties. The financial liability is distributed among the entities and individuals involved:
- NanoBit Limited: Ordered to pay over $532,000 in disgorgement, nearly $82,000 in prejudgment interest, and a civil penalty of $1.1 million.
- Entity Defendants: Radiant Horizons Limited, Sweet Karma Fashion Inc., and Zhao Tropical Deli Inc. are each penalized $1.1 million.
- Individual Defendants: Jiajie Liu was hit with a $120,000 penalty, while Hua Zhao was fined $55,000.
All defendants are permanently barred from participating in future securities offerings or violating federal anti-fraud provisions. However, the individuals Liu and Zhao retain the right to trade in their personal brokerage accounts.
The Broader Financial and Regulatory Context
This enforcement action highlights the SEC’s aggressive stance on cryptocurrency fraud. As digital assets gain mainstream attention, regulators are increasingly cracking down on relationship-based financial scams that target retail investors. The NanoBit case, prosecuted alongside a similar platform called CoinW6, represents the SEC’s initial wave of enforcement actions targeting relationship-investment schemes using fake trading applications. For investors, this serves as a critical reminder of the importance of verifying registration claims; NanoBit had falsely claimed its affiliate, NanobitUS Securities, was registered with the SEC.
Frequently Asked Questions
What is a “pig-butchering” relationship-investment scam?
This is a type of financial fraud where scammers build trust with victims over time—often through messaging apps like WhatsApp—before convincing them to invest in fake platforms. The term refers to “fattening up” the victim with fake profits before stealing their entire investment.
How can I verify if a cryptocurrency broker or platform is registered with the SEC?
Investors can verify registration claims by using the SEC’s free Investment Adviser Public Disclosure (IAPD) database or the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck tool. Fake platforms often lie about their regulatory status to appear legitimate.
What does a default judgment mean in SEC enforcement?
A default judgment occurs when the accused parties fail to respond to a lawsuit or appear in court. The court rules in favor of the plaintiff (in this case, the SEC) by default, requiring the defendants to pay the specified disgorgement and penalties.
