SEC Accuses Rimar Capital Entities and Owner of AI Trading Fraud, Promising Investors False Returns

The Securities and Exchange Commission (SEC) announced charges against Rimar Capital USA, Inc. (Rimar USA), Rimar Capital, LLC (Rimar LLC), Itai Liptz, and Clifford Boro for making false and misleading statements about Rimar LLC’s purported use of artificial intelligence, or AI, to perform automated trading for client accounts and numerous other material misrepresentations. The parties agreed to settle the SEC’s charges and pay $310,000 in total civil penalties.

According to the SEC order, Liptz, owner and CEO of Rimar LLC and Rimar USA, with the help of Boro, a Rimar USA board member, raised nearly $4 million from 45 investors for the development of Rimar LLC, an investment adviser that was falsely described as having an AI-driven platform for trading securities. The order found that the Rimar entities, Liptz, and Boro also made misrepresentations about Rimar LLC’s assets under management and its investment returns. In addition, the order found that Rimar LLC and Liptz obtained advisory clients using the misleading statements and that Liptz misappropriated company funds for personal expenses.

“Through entities he controlled, Liptz lured investors and clients with multiple fabrications, including with buzzwords about the latest AI technology,” said Andrew Dean, Co-Chief of the SEC’s Asset Management Unit. “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’.”

Investor Alert about AI and investment fraud

An Investor Alert issued by the SEC’s Office of Investor Education and Advocacy says: “Be wary of claims — even from registered firms and professionals — that AI can guarantee amazing investment returns.” Numerous unregistered and unlicensed online investment platforms, as well as unlicensed and unregistered individuals and firms, are promoting AI trading systems that make unrealistic claims.

Bad actors might use catchy AI-related buzzwords and make claims that their companies or business strategies guarantee huge gains. Red flags of these types of scams include high-pressure sales tactics by unregistered individuals, promises of quick profits, or claims of guaranteed returns with little or no risk.

Fraudsters can use AI technology to clone voices, alter images, and even create fake videos to spread false or misleading information. AI technology might be used to impersonate a family member or friend, with the intent to convince an investor to transfer money or securities out of an investment account.