SEC sues Privvy founder over $12.3m AI crypto bot

The US Securities and Exchange Commission has sued Texas entrepreneur Nathan Fuller over an alleged $12.3 million crypto investment scheme involving fake artificial intelligence trading bots.

The regulator said Fuller raised money from about 150 investors through Privvy Investments LLC and names including Privvy Investments and Gateway Digital Investments.

The SEC alleged that Fuller sold passive joint-venture interests from at least October 2022 to mid-2024.

Investors were told their money would support a crypto arbitrage operation powered by proprietary AI trading bots.

Fuller allegedly claimed the bots could scan crypto markets around the clock and carry out high-frequency arbitrage trades.

The SEC said investors were also told the software could limit losses through stop-loss code.

The pitch reportedly promised returns of 40% to 50% within 30 to 45 days.

Some investors were allegedly promised returns of more than 100% in less than one month.

The SEC said the trading bots were not AI systems and did not work as functional trading software.

The complaint alleged that only about $380,000 of the $12.3 million raised was used to buy crypto.

That amount represented roughly 3% of total investor funds collected through the alleged scheme.

The SEC said the crypto trades were made without the advertised bots and failed to generate profit.

The regulator alleged that Fuller diverted most of the remaining investor money for other purposes.

Fuller is accused of misusing at least $6.2 million for personal spending.

The alleged personal spending included a home purchase, gambling, travel and vehicles.

The SEC also alleged that about $5.5 million went to Ponzi-like payments for earlier investors.

The regulator said those payments used fresh investor deposits to keep the operation running.

The complaint alleged that Fuller used deception when investors started asking to withdraw their money.

Fuller allegedly created false account statements showing gains that did not exist.

The SEC said he also referred to entities that were not real.

The complaint further alleged that Fuller used AI to create a letter from a fake auditing firm.

That letter allegedly told investors their accounts were under review and would later move into a trust.

The case comes as US regulators increase scrutiny of crypto schemes using AI-related claims.

Regulators have warned that fraudsters often attach AI branding to older investment scams to make them sound more credible.

The Privvy case is smaller than some recent global crypto fraud cases, but it highlights growing concern over AI trading bot claims.

The SEC charged Fuller with violating federal securities registration and antifraud rules.

The regulator is seeking permanent injunctions, repayment of alleged illegal gains with interest and civil penalties.

The complaint is a civil case, although similar matters can sometimes move alongside criminal investigations.

Fuller will have the opportunity to respond to the allegations as the case proceeds in federal court.

If the SEC succeeds, recovered funds could go back to affected investors, although Ponzi recoveries often fall short of total losses.