SEC Cracks Down on $14M Crypto Scam Targeting Retail Investors via AI and Social Media Schemes

The U.S. Securities and Exchange Commission (SEC) has filed charges against three crypto trading platforms and four investment clubs, accusing them of running a $14 million fraud targeting retail investors. The platforms—Morocoin Tech Corp., Berge Blockchain Technology Co. Ltd., and Cirkor Inc.—along with the investment groups AI Wealth Inc., Lane Wealth Inc., AI Investment Education Foundation Ltd., and Zenith Asset Tech Foundation—allegedly used social media and fake trading interfaces to mislead investors according to the SEC's filing.

According to the SEC, the scheme operated from January 2024 through January 2025, luring investors with promises of AI-driven investment strategies and fabricated trading dashboards. The defendants are accused of creating a "confidence scam" in which investors were led to believe they were making legitimate investments, only to have their funds misappropriated and moved overseas as the SEC alleges.

Investors were reportedly lured through targeted social media advertisements and private messaging groups, where fraudsters posed as financial professionals. Once engaged, they were directed to open accounts on the fake trading platforms, which falsely claimed to be licensed and legitimate. These platforms allegedly displayed fabricated account balances and simulated trading activity, giving users the impression of active investment and profit generation according to the SEC's investigation.

How the Scam Operated

The investment clubs, including AI Wealth and Lane Wealth, allegedly used WhatsApp and social media platforms to build trust among potential investors. They shared fabricated AI-generated investment tips and created a sense of urgency and legitimacy, encouraging users to fund accounts on the platforms according to the SEC's report.

Once investors deposited funds, the defendants allegedly promoted "Security Token Offerings" that purportedly represented digital assets issued by legitimate companies. In reality, the SEC alleges that neither the token offerings nor the companies existed. No actual trading occurred on the platforms, and the funds were instead siphoned through a network of bank accounts and crypto wallets as the SEC claims.

The scheme allegedly intensified when investors tried to withdraw their money. At that point, they were told to pay additional fees—such as taxes or verification costs—to access their funds. These fees were reportedly designed to extract more money from victims rather than provide access to their accounts. When investors pushed back or stopped paying, communication reportedly ceased altogether according to the SEC's findings.

Broader Implications for Crypto Regulation

The SEC's action highlights a growing concern around AI-themed crypto scams and the use of social media for fraudulent investment schemes. Laura D'Allaird, Chief of the SEC's Cyber and Emerging Technologies Unit, emphasized that the case demonstrates how fraudsters are leveraging emerging technologies and digital platforms to exploit retail investors according to the SEC.

The enforcement action is part of a broader crackdown on crypto fraud, following recent convictions in similar cases. The SEC is seeking permanent injunctions, civil penalties, and the return of funds with interest from the defendants. In addition, the agency's Office of Investor Education and Assistance has issued warnings to investors, urging them to be cautious of investment opportunities shared in social media groups and to independently verify the legitimacy of any financial offer as the SEC reports.

Regulatory scrutiny of the crypto space has intensified, particularly as the industry matures and new tools like AI become more integrated into investment products. Recent meetings between the SEC and major players like BlackRock highlight ongoing discussions about the regulatory framework for crypto ETFs and staking capabilities. While some regulators have expressed optimism about the potential of digital assets, others have raised concerns about the risks associated with unregulated platforms and fraudulent actors according to industry analysis.

What This Means for Investors

The case serves as a cautionary tale for retail investors navigating the crypto market. The SEC has repeatedly warned against unsolicited investment offers, particularly those promoted in social media and messaging apps. Investors are advised to verify the credentials of any entity offering crypto products and to use official resources like Investor.gov to check background information according to the SEC.

The enforcement action also underscores the need for stronger investor education and due diligence in the crypto space. As more sophisticated scams emerge, regulators and industry participants are increasingly focused on ensuring that investors are aware of the risks and have the tools to protect themselves. The SEC's investor alert, issued alongside the lawsuit, highlights the importance of not relying solely on information shared in group chats or social media posts when making investment decisions as the SEC states.

The latest SEC action adds to a growing list of enforcement efforts targeting crypto-related fraud. With regulatory uncertainty persisting—especially with delays in the Clarity Act—investor sentiment has been affected, with outflows reported in major crypto ETPs. These trends highlight the need for clear and consistent regulatory guidance to foster a more stable and trustworthy environment for crypto investors.