The U.S. Securities and Exchange Commission has filed charges against a Texas-based individual and his investment company, alleging that they raised about $12.3 million, or nearly ₹105 crore, from around 150 investors through a purported AI-powered cryptocurrency trading platform that promised unusually high returns.
According to the SEC, the alleged scheme ran from October 2022 to mid-2024. Investors were reportedly told that their money would be managed through automated AI trading bots capable of high-frequency arbitrage trading across cryptocurrency platforms.
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Promises of High Returns Under Scrutiny
Court filings cited by the SEC state that investors were promised returns of 40 percent to 50 percent within 30 to 45 days. In some cases, profits of more than 100 percent within 21 days were allegedly guaranteed.
Investors were also reportedly told that their funds were protected through insurance coverage and other financial safeguards. The SEC has alleged that these representations were misleading and not supported by facts.
At the centre of the case were proprietary AI trading bots that were claimed to generate profits through advanced crypto trading strategies. The regulator has alleged that the bots did not operate as represented.
Fake Statements and Ponzi-Like Payments Alleged
According to the SEC, investors were allegedly given fabricated account statements, fictitious business correspondence and misleading documents to create the appearance that their investments were performing successfully.
Investigators claim that a significant portion of the funds raised was diverted for personal use. Around ₹53 crore in investor money was allegedly misappropriated for personal expenses.
The regulator further alleged that about ₹47 crore was used to pay earlier investors. The SEC said this pattern resembled a Ponzi-like scheme, where money from new investors is used to pay returns to existing participants instead of profits being generated through legitimate business activity.
Regulators Warn Over AI and Crypto Investment Claims
The case comes amid rising global concern over investment schemes using artificial intelligence and cryptocurrency as marketing tools. Regulators have warned that complex technological terms and claims of automated profits can make fraudulent schemes appear credible to unsuspecting investors.
The SEC has asked the court to impose permanent injunctions, order recovery of allegedly ill-gotten gains and levy civil penalties against those involved. Investigators are expected to further examine how investor funds were used and whether other parties played a role in the alleged misconduct.
Financial experts have cautioned investors to treat promises of extraordinary short-term returns with care. They have advised verification of regulatory status, company registration, audit records and actual business operations before committing money to AI or crypto-linked investment platforms.
