The U.S. Securities and Exchange Commission (SEC) has recently taken legal action against three individuals and five companies for their involvement in pig butchering scams, a type of confidence-enabled investment fraud that preys on victims through social media platforms. These scams involve fraudsters gaining the trust of individuals and convincing them to invest large sums of money in fake cryptocurrency platforms, only to disappear with the funds once the investment is made.
The SEC’s enforcement actions against these individuals and companies mark the first time the Commission has specifically targeted this type of crypto scam. The lawsuits were filed just a day before the U.S. House Financial Services Committee was scheduled to hold a hearing on pig butchering scams, highlighting the growing concern over these fraudulent schemes.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized the significant risk these relationship investment scams pose to retail investors, particularly as they become more prevalent and sophisticated. He warned the public to remain vigilant against potential scams promoted by strangers on social media, urging individuals to exercise caution when considering investment opportunities offered in such contexts.
One of the lawsuits brought by the SEC targets the alleged fraudulent activities of a crypto trading platform called NanoBit. The scheme involved three U.S. residents—Jiajie Liu, Fei Liao, and Hua Zhao—who are accused of orchestrating a scheme that defrauded at least 18 investors of nearly $1 million in crypto assets and fiat currency. The fraudsters posed as finance professionals in WhatsApp groups, luring investors to put their money into NanoBit’s platform with promises of high returns. However, when investors attempted to withdraw their funds, they discovered the platform was fake, and the perpetrators had disappeared.
In a separate lawsuit, the SEC targeted another fake crypto trading platform known as CoinW6. This scheme allegedly defrauded at least 11 investors out of $2.2 million between July 2022 and December 2023. Unlike the NanoBit scheme, the CoinW6 fraudsters adopted a different approach, pretending to be “young, attractive professionals” who initiated romantic relationships with victims on social media. After building trust and rapport, the fraudsters introduced the idea of investing in CoinW6, ultimately deceiving victims into investing significant sums of money into the platform.
The tactics employed by these fraudsters are reminiscent of classic pig butchering operations, where perpetrators establish personal connections with victims before exploiting them financially. In the case of the CoinW6 scheme, the fraudsters exploited emotional manipulation to deceive victims into investing in the fake platform, preying on their vulnerabilities and trust.
According to a recent FBI report, investors lost a staggering $5.6 billion to crypto fraud in the previous year, with a significant portion attributed to investment scams like pig butchering schemes. The prevalence of these fraudulent activities underscores the need for heightened awareness and vigilance among investors, particularly when approached with investment opportunities through social media channels.
The SEC’s actions against the individuals and companies involved in these pig butchering scams serve as a warning to would-be fraudsters and a reminder to the public to exercise caution and due diligence when considering investment opportunities. As the crypto market continues to evolve and attract more investors, regulatory authorities like the SEC play a crucial role in protecting consumers from fraudulent activities and ensuring the integrity of the financial system.
