The SEC charged a Cypress, Texas resident with running a $12.3 million crypto fraud scheme that leaned on fake AI trading bots, in a complaint filed Thursday in federal court in Houston.

Nathan Fuller, the founder and sole member of Privvy Investments LLC, raised the money from about 150 investors across nine states and two foreign countries between October 2022 and mid-2024, the agency said. He also did business under the assumed name Gateway Digital Investments.

Fuller told investors that proprietary AI-based bots autonomously scanned crypto trading platforms to capture small price gaps through high-frequency arbitrage, promising returns of 40% to 50% within 30 to 45 days, according to the SEC. Some were told they could earn guaranteed profits topping 100% in as little as 21 days.

The bots did not work as advertised. To the extent the code ran at all, it carried no AI or stop-loss functionality, and Fuller used only about $380,000, roughly 3% of the funds raised, to actually buy crypto, generating no profit, the complaint says.

Instead, the SEC alleges, Fuller misappropriated at least $6.2 million on a roughly $1 million house, gambling, trading cards, travel and a Jeep, and routed about $5.5 million back to earlier investors in Ponzi-like payments.

To quiet investor concerns, Fuller falsely claimed he held a Texas money-transmitter license and a surety bond, that funds were FDIC-insured, and that a professional-liability policy backed the venture, the agency says. None of it was real. The complaint says Fuller invented an insurer called Texas Guarantors & Securities, and altered a genuine but short-lived biBERK certificate to show $5 million in professional-liability coverage that the policy explicitly excluded.

In a twist for an AI-branded scheme, the cover-up also ran on AI. As investors tried to withdraw funds in June 2024, Fuller spun up a fake firm called Blockchain Audit Solutions and used ChatGPT to draft a phony letter telling investors their accounts had been moved and needed “KYC verification” before any payout, according to the complaint.

The civil case is not Fuller’s first trip through federal court over Privvy. Last September, a Texas bankruptcy court denied him a discharge of more than $12.5 million in debt after he admitted, according to the Justice Department, to operating Privvy as a Ponzi scheme and fabricating documents to advance it, as The Block previously reported.

Fuller filed for Chapter 7 in October 2024 after investors sued him in Texas state court and a receiver seized his assets, the DOJ said. The SEC’s complaint does not reference that bankruptcy judgment or his prior Ponzi admission.

The case was assisted by the SEC’s Cyber and Emerging Technologies Unit. The unit, launched in early 2025, built its profile on cases like PGI Global founder Ramil Palafox, charged last year over a $198 million scheme the SEC said masked a fake AI-powered auto-trading platform. It also follows the SEC’s December action against a network of fake crypto platforms and “AI investment clubs” accused of a $14 million scam, part of a wider run of fraud cases pairing AI branding with promises of guaranteed crypto returns.

The SEC charged Fuller with violating the registration and antifraud provisions of the Securities Act and the Exchange Act, and is seeking permanent injunctions, disgorgement with prejudgment interest, civil penalties and a bar from participating in securities offerings.

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RichSilo Visions:

Executive Summary (TL;DR)

The SEC’s action against Nathan Fuller represents the inevitable collapse of yet another AI-branded crypto scam, exposing the dangerous intersection of technological hype and regulatory arbitrage. This case underscores how sophisticated fraudsters weaponize investor FOMO around emerging technologies, with immediate implications for the credibility of legitimate AI-driven crypto platforms.

The Core Friction

The core friction isn’t just Fuller’s deception, but the broader ecosystem that enables such schemes to flourish. The crypto industry’s persistent problem is the gap between technological promises and verifiable execution—exacerbated by limited regulatory oversight and investor appetite for “too good to be true” returns. Fuller’s operation exploited the AI hype cycle perfectly, promising impossible returns while creating elaborate documentation to appear legitimate. The friction lies between the desire for innovation and the reality that most retail investors lack the technical sophistication to verify claims about AI trading systems.

Market Impact & Chain Reaction

Short-term: This case will likely increase regulatory scrutiny on all AI-powered crypto platforms, potentially causing a temporary dip in tokens associated with AI trading narratives. Projects with verifiable, auditable AI systems may actually benefit from the increased differentiation.

Mid-term: The fallout will accelerate the shift toward transparent, auditable trading systems and potentially boost the credibility of established players like QuantConnect or Numerai that have built legitimate AI trading platforms with proper documentation. It may also lead to stricter requirements for any platform claiming AI capabilities, creating a more competitive landscape where technical execution matters more than marketing claims.

RichSilo Verdict

Smart money should watch for three key developments: 1) How regulators differentiate between legitimate AI crypto applications and fraudulent ones, 2) Which established platforms benefit from increased skepticism toward AI claims, and 3) The emergence of verification standards for AI trading systems. The real opportunity lies not in avoiding AI-driven crypto entirely, but in identifying projects that prioritize verifiable technology over marketing hype—a trend that this SEC action has inadvertently accelerated.