SEC Settles $4M 'AI-Washing' Case: Trading Firm Accused of Misleading Investors with False AI Claims

SEC settles with trading firm over $4M 'AI-washing' scheme

A trading firm has settled charges with the United States Securities and Exchange Commission, which the agency accused of faking its artificial intelligence capabilities and misleading its investors to raise nearly $4 million. Rimar Capital LLC, Rimar Capital USA, their CEO Itai Liptz and Rimar USA board member Clifford Boro together paid a $310,000 civil penalty to settle fraud-related charges -- which they didn't admit or deny -- the SEC said in an Oct. 10 statement. The co-chief of the SEC's Asset Management Unit, Andrew Dean, claimed Liptz and Boro raised $3.73 million using AI "buzzwords" to describe Rimar's claimed "AI-driven" platform for trading cryptocurrencies, equities and futures to prospective investors. "As AI becomes more popular in the investing space, we will continue to be vigilant and pursue those who lie about their firms' technological capabilities and engage in 'AI washing,'" Dean said. The SEC alleged that Liptz and Boro made repeated claims about an AI stock and crypto trading platform through pitch decks, online posts in a members-only investment group and emails to prospective investors to raise funds. "But the firm had no trading application at all at the time of the fundraising, and has never had a trading platform for stock or crypto assets," the SEC claimed in its order. The SEC also accused the pair of lying to investors about Rimar LLC's assets under management, which the two said was between $16 million and $20 million when it "actually had less than $2 million." The agency also alleged Liptz and Boro lied about Rimar's client account performance, such as obtaining a 46% compounded annual growth rate since 2015 in one pitch deck. Related: Whistleblowers asked the SEC to investigate OpenAI over alleged illegal NDAs Liptz also allegedly misappropriated some of the company funds for personal expenses, which investors believed would be used for marketing and making a "Hedge Fund for everyone app," the SEC said. Rimar USA, Rimar LLC, Liptz and Boro consented to the entry of an order finding antifraud violations and a cease and desist from violating the charged provisions without admitting fault. Liptz agreed to pay disgorgement and prejudgment interest totaling $213,600 in addition to the $250,000 civil penalty and a five-year bar from the industry. Rimar LLC consented to be censured.

SEC Settles Charges With Trading Firm It Says Tricked Investors With AI 'Buzzwords' - Decrypt

The Securities and Exchange Commission (SEC) has settled charges with a trading firm that allegedly lied to investors about its claimed use of artificial intelligence (AI) to perform automated trading of cryptocurrency and other assets. Itai Liptz, owner and CEO of investment firms Rimar LLC and Rimar USA, and Cliffard Boro, a Rimar USA board member, raised nearly $4 million from 45 investors by claiming that it could use AI to trade crypto, equities, bonds, and other investments, the SEC said Thursday. But in reality, there was no use of AI, the SEC alleged -- and the claims of using emerging technology were just "buzzwords" used to fool investors in what the agency described as "AI-washing." The Burlingame, California-based Rimar USA agreed to settle the charges and pay $310,000 in total civil penalties without admitting or denying the regulator's findings. "Through entities he controlled, Liptz lured investors and clients with multiple fabrications, including with buzzwords about the latest AI technology," Andrew Dean, Co-Chief of the SEC's Asset Management Unit, said in a Thursday release. The lawsuit further alleged that despite Rimar claiming to have "an artificial intelligence-driven platform for trading, among other products, stock and crypto assets," in reality it had "no trading application at all at the time of the fundraising, and has never had a trading platform for stock or crypto assets." Liptz agreed to pay disgorgement and prejudgment interest totaling $213,611, to pay a $250,000 civil penalty, and to be subject to an investment company prohibition and associational bar, the SEC said. Boro, meanwhile, agreed to pay a $60,000 civil penalty, and Rimar LLC consented to be censured. Wall Street watchdog the SEC in January warned the public about how some "bad actors might use catchy AI-related buzzwords" in order to con would-be investors. "As AI becomes more popular in the investing space, we will continue to be vigilant and pursue those who lie about their firms' technological capabilities and engage in 'AI washing,'" Dean added in Thursday's release.