SEC Settlement with Trading Firm Over Misleading AI Claims

Trading Firm Settlement with SEC

A trading firm, Rimar Capital, has settled charges with the U.S. Securities and Exchange Commission (SEC) for misleading investors about its artificial intelligence capabilities. The firm, along with its CEO Itai Liptz and board member Clifford Boro, faced accusations of raising nearly $4 million based on false claims of having an AI-driven trading platform.

Misleading AI Claims and Fundraising

The SEC alleged that Rimar Capital and its executives used AI "buzzwords" to attract investments, claiming they had developed a sophisticated trading platform for cryptocurrencies, equities, and futures. However, investigations revealed that the firm had no such trading application at the time and never possessed a platform for stocks or crypto assets.

Inflated Financial Claims

Further accusations included misleading statements about the firm's assets under management, which were reported to be between $16 million and $20 million, while in reality, the assets were less than $2 million. The SEC also charged the firm with falsely reporting client account performance, including a claimed 46% compounded annual growth rate since 2015.

Misuse of Investor Funds

Itai Liptz was additionally accused of misappropriating company funds for personal use, despite assurances to investors that the funds would support marketing efforts and the development of a “Hedge Fund for everyone” app.

Penalties and Industry Ban

Rimar Capital, along with Liptz and Boro, agreed to a $310,000 civil penalty to settle the fraud-related charges, without admitting or denying the allegations. Liptz also agreed to pay $213,600 in disgorgement and prejudgment interest, along with a $250,000 penalty and a five-year industry ban. Rimar consented to be censured by the SEC, marking a significant step in regulatory enforcement against misleading AI claims in the investment sector.