SEC Files Suit Over $14M Crypto Scam Using AI Tips and Fake Platforms

The U.S. Securities and Exchange Commission (SEC) has announced charges against seven entities involved in a $14 million cryptocurrency investment scam. The fraudulent scheme, which spanned from January 2024 to January 2025, targeted retail investors through social media and messaging platforms. The SEC alleges that the defendants used fake AI-generated investment tips and fraudulent trading platforms to misappropriate funds.

The defendants include three purported crypto trading platforms—Morocoin Tech Corp., Berge Blockchain Technology Co., and Cirkor Inc.—and four investment clubs: AI Wealth Inc., Lane Wealth Inc., AI Investment Education Foundation Ltd., and Zenith Asset Tech Foundation. These entities allegedly orchestrated a multi-step fraud designed to mimic legitimate investment opportunities. The scheme involved the creation of fake security token offerings and deceptive withdrawal processes that further drained investor accounts according to the SEC complaint.

The SEC complaint details how the defendants lured victims with advertisements on social media platforms. Once engaged, investors were directed to private group chats on WhatsApp, where fraudsters posed as financial professionals. These individuals used AI-generated investment tips to build credibility and trust among investors. The platforms falsely claimed to be government-licensed and offered security token offerings purportedly issued by legitimate businesses.

How the Scam Operated

The investment clubs allegedly operated by first creating a sense of legitimacy and trust through social media advertisements. These ads invited users to join investment groups on messaging platforms, where they were met by individuals presenting themselves as experienced financial advisors. The SEC alleges that these groups used AI-generated trading tips to simulate consistent profits, enticing investors to fund accounts on the fake platforms.

Once investors opened and funded accounts on the three fake crypto trading platforms, the defendants allegedly offered security token offerings (STOs) presented as being issued by legitimate companies. In reality, neither the STOs nor the purported issuing companies existed. The SEC states that no actual trading took place on the platforms, and the entire operation was designed to misappropriate investors' funds.

When investors attempted to withdraw their money, the defendants allegedly demanded additional advance fees. These fees were often presented as necessary to process the withdrawals, but the SEC says they were never honored. Instead, the funds were routed overseas through a network of bank accounts and crypto wallets, making it difficult for victims to recover their money according to reports.

SEC's Response and Investor Warnings

Laura D'Allaird, chief of the SEC's Cyber and Emerging Technologies Unit, emphasized that this case highlights a growing trend in investment fraud. She noted that scammers are increasingly using AI and crypto narratives to target vulnerable retail investors. "Fraud is fraud, and we will vigorously pursue securities fraud that harms retail investors," she stated. The SEC is seeking permanent injunctions, civil penalties, and disgorgement with prejudgment interest against the defendants according to the agency's statement.

In addition to the legal action, the SEC has issued an investor alert warning about the risks of relying on unsolicited investment advice from social media and messaging apps. The agency advises investors to verify the background of any entity offering investment opportunities through its Investor.gov website. It also cautions against any group chat where investment advice is given by unknown individuals according to the SEC's warning.

The SEC's action against these entities is part of a broader effort to combat investment fraud in the rapidly evolving crypto market. The regulator has highlighted the importance of investor education and due diligence in preventing such scams. With the increasing sophistication of these schemes, regulators stress the need for vigilance and proactive measures to protect retail investors from exploitation.