SEC Charges Firm for “AI Washing” in Investment Scheme

An investment firm is facing charges by the SEC for misrepresenting AI capabilities in automating trades for clients. The Securities and Exchange Commission (SEC) charged Rimar Capital USA, Inc., its owner and a board member, with deceiving investors about the firm’s purported AI-driven trading platform.

Falsely Misrepresenting AI

According to the SEC, Rimar Capital raised nearly $4 million from 45 investors under the false pretense of having an advanced AI platform for automated trading. The allegations include misrepresentations regarding the company’s assets under management and investment returns.

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

“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’.”

The SEC’s order found that the charged individuals engaged in a pattern of deception that ultimately harmed investors. The regulator used the phrase “AI washing” to describe the allegations.

Imposed Fines

In response to the SEC’s findings, Rimar Capital and its executives agreed to a settlement that totals $310,000 in civil penalties. One of the accused individual will pay $250,000 and return $213,611 in misappropriated funds, while the other will pay $60,000.

Besides that, Rimar LLC faces censure for its actions, while one of the charged individuals faces an investment company prohibition and an associational bar, though he may reapply in five years.

Expect ongoing updates as this story evolves.

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