coindesk.com
The U.S. Securities and Exchange Commission (SEC) has filed suit against three individuals and five companies for allegedly operating pig butchering scams – a type of confidence-enabled investment scam in which fraudsters befriend victims over text-based social media apps, gain their trust and convince them to invest large amounts of money in fictitious crypto platforms before stealing their funds and disappearing.
The two lawsuits filed Tuesday are the SEC’s first enforcement actions alleging this type of crypto scam, and come one day before the U.S. House Financial Services Committee is set to hold a hearing on pig butchering scams.
“Relationship investment scams, including those involving crypto asset investments, pose a risk of catastrophic harm to retail investors, and the threat is increasing rapidly as these scams become more popular with fraudsters,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement in a press statement. “In these two cases, we allege that fraudsters created fake crypto ecosystems that displayed false information to investors. Our allegations serve as a reminder to the public to be on heightened alert about potential scams involving investment opportunities promoted by strangers on social media.”
The SEC’s lawsuit against purported crypto trading platform NanoBit alleges that participants in the scheme – including three U.S. residents named in the suit, 28-year-old Jiajie Liu of Los Angeles, California, 29-year-old Fei Liao of San Gabriel, California, and 26-year-old Hua Zhao of Flushing, New York – engaged in a coordinated scheme to defraud at least 18 investors of nearly $1 million in crypto assets and fiat currency.
Liao, Zhao, and Liu allegedly pretended to be finance industry professionals in WhatsApp groups and enticed would-be investors to put their money into NanoBit’s platform. Though the platform seemed to show investors their assets were making money, when they tried to withdraw they couldn’t – and the fraudsters disappeared.
The SEC’s other lawsuit filed Tuesday, against another fake crypto trading platform referred to as CoinW6, alleges that unnamed participants in the scheme defrauded at least 11 investors out of $2.2 million between July 2022 and December 2023.
Instead of pretending to be finance professionals, however, scheme participants in the CoinW6 scheme allegedly took the guise of “young, attractive professionals” pretending to stumble across a victim’s social media profile before attempting to strike up a romantic relationship with them.
As is the case in many pig butchering operations, the CoinW6 fraudsters allegedly spent weeks developing romantic relationships over text before mentioning cryptocurrency. After getting their claws firmly into the victims, who at this point believed their romantic connections to be genuine, the fraudsters would introduce the idea of investing into CoinW6.
According to the complaint, the online interface would show victims that their investments were making significant returns, and the scammers would pressure them into putting more and more money into the platform – sometimes “even recommending that investors withdraw funds from retirement accounts or borrow money from friends and family to generate larger returns on CoinW6” – often by pretending to withdraw romantically.
A recent report from the FBI found that investors lost a record-high $5.6 billion to crypto fraud last year, $4 billion of which was lost to investment scams, including pig butchering scams.