The U.S. Securities and Exchange Commission (SEC) recently announced charges against four entities and three individuals involved in a sophisticated relationship investment scam. Among the entities named is Sweet Karma Fashion Inc., a company that on the surface appears to be related to the appealing concept of “karma fashion,” yet is alleged to be deeply entangled in fraudulent activities. This case highlights a disturbing trend where scammers exploit trust and relationships to lure unsuspecting individuals into fake investment schemes, often using seemingly legitimate or even attractive business names to mask their illicit operations.
The SEC complaint details how these defendants utilized social media platforms to connect with potential investors. By impersonating financial professionals in WhatsApp groups, they meticulously cultivated trust and confidence. This tactic, known as “relationship investment scams,” preys on the human desire for connection and the inclination to trust individuals who appear knowledgeable and friendly. Once this rapport was established, the perpetrators promoted investments through a purported cryptocurrency trading platform called NanoBit.
To further deceive investors and create a veneer of legitimacy, NanoBit falsely claimed an affiliation with NanobitUS Securities, asserting it was an SEC-registered broker. This fabricated claim aimed to reassure investors about the platform’s safety and regulatory compliance. The individuals posing as financial experts then aggressively promoted fake initial coin offerings (ICOs), promising substantial and rapid returns. These tactics are designed to create a sense of urgency and exclusivity, pressuring individuals to invest quickly without conducting thorough due diligence.
In reality, the NanoBit platform was a complete sham. Investor funds were not used for any legitimate trading activities. Instead, they were funneled directly to the scheme participants. Investigations revealed that over $2 million was wired to bank accounts in Hong Kong, and hundreds of thousands of dollars’ worth of investors’ cryptocurrency assets were misappropriated. This money was allegedly used for the personal enrichment of the scheme’s orchestrators, leaving investors with significant financial losses and shattered trust.
The SEC’s charges against NanoBit Limited, Radiant Horizons Limited, Sweet Karma Fashion Inc., Zhao Tropical Deli Inc., Jiajie Liu, Fei Liao, and Hua Zhao include violations of antifraud provisions of federal securities laws. The agency is seeking permanent injunctions to prevent future violations, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against each defendant. This strong response from the SEC underscores the seriousness of these types of scams and the agency’s commitment to protecting investors.
This case serves as a critical reminder of the dangers of online investment scams, particularly those that leverage social media and personal relationships. The allure of “karma fashion” or any seemingly positive or trendy concept should not blind investors to the fundamental need for caution and verification. Always be skeptical of unsolicited investment offers, especially those promising unrealistically high returns. It is crucial to independently verify the legitimacy of any investment platform and the credentials of those offering investment advice. Utilize resources like Investor.gov to check the backgrounds of individuals and firms offering investments and to educate yourself about common investment scams. Protecting yourself from fraud requires vigilance, healthy skepticism, and a commitment to informed decision-making.
