The United States Securities and Exchange Commission (SEC) has reached a settlement with Rimar LLC, a trading firm accused of exaggerating its artificial intelligence (AI) capabilities to deceive investors. The SEC alleged that the company and its executives raised almost $4 million through these misrepresentations.
Penalties and Charges
Rimar Capital LLC, Rimar Capital USA, CEO Itai Liptz, and board member Clifford Boro collectively paid a $310,000 civil penalty to resolve the SEC’s fraud allegations. According to the SEC’s statement on October 10, the parties settled without admitting or denying the charges.
Andrew Dean, co-chief of the SEC’s Asset Management Unit, highlighted that Liptz and Boro had used AI “buzzwords” to mislead potential investors, promoting their firm’s “AI-driven” platform for trading cryptocurrencies, stocks, and futures. “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,’” Dean emphasized.
SEC’s Allegations
The SEC accused Liptz and Boro of making numerous false claims regarding their AI-based trading platform. These claims were presented through pitch decks, social media posts, and emails to a private investment group in an effort to attract funding. However, the SEC’s order stated that, at the time of fundraising, the company did not possess any trading application for stock or cryptocurrency, nor had it ever developed such a platform.
Furthermore, the SEC alleged that the executives falsely inflated the firm’s assets under management. They claimed Rimar LLC held between $16 million and $20 million, while the actual amount was less than $2 million. The SEC also accused them of providing inaccurate information about the performance of client accounts, such as citing a 46% compounded annual growth rate since 2015 in one of their pitch decks.
In addition, the SEC claimed that Liptz misused company funds for personal expenses, misleading investors who believed the money would be allocated toward marketing and developing a user-friendly hedge fund app.
Without admitting liability, Rimar USA, Rimar LLC, Liptz, and Boro agreed to a cease-and-desist order and acknowledged antifraud violations. Liptz agreed to pay $213,600 in disgorgement and prejudgment interest on top of a $250,000 civil penalty. He also accepted a five-year industry ban. Rimar LLC, on the other hand, consented to a formal censure.
