SEC Charges Rimar Capital Entities and Owner with Defrauding Investors via "AI-Washing"

SEC Charges Rimar Capital Entities and Owner Itai Liptz for Defrauding Investors by Making False and Misleading Statements About Use of Artificial Intelligence

The Securities and Exchange Commission today announced charges against Rimar Capital USA, Inc. (Rimar USA), Rimar Capital, LLC (Rimar LLC), Itai Liptz, and Clifford Boro for making false and misleading statements about Rimar LLC’s purported use of artificial intelligence, or AI, to perform automated trading for client accounts and numerous other material misrepresentations. The parties agreed to settle the SEC’s charges and pay $310,000 in total civil penalties.

According to the SEC order, Liptz, owner and CEO of Rimar LLC and Rimar USA, with the help of Boro, a Rimar USA board member, raised nearly $4 million from 45 investors for the development of Rimar LLC, an investment adviser that was falsely described as having an AI-driven platform for trading securities. The order found that the Rimar entities, Liptz, and Boro also made misrepresentations about Rimar LLC’s assets under management and its investment returns. In addition, the order found that Rimar LLC and Liptz obtained advisory clients using the misleading statements and that Liptz misappropriated company funds for personal expenses.

FBI creates its own crypto token to nab suspects in alleged fraud scheme

Employees of ZM Quant allegedly counselled the backers of NexFundAI on how to artificially drive up the price of the token before selling tokens to “cash out at the peaks”, federal officials said in an indictment. At one point in May, ZM Quant’s trades amounted to more than 80 per cent of NexFundAI’s trading volumes, according to the SEC.

But ZM Quant was unaware that NexFundAI was not just another fledgling crypto token with dreams of a lofty valuation: it was a tool of federal law enforcement agents bent on dismantling the alleged pump-and-dump operation.

SEC Charges Cumberland DRW for Operating as an Unregistered Dealer in the Crypto Asset Markets

The Securities and Exchange Commission today charged Chicago-based Cumberland DRW LLC with operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities, in violation of the registration requirements of the federal securities laws that are designed to protect investors.

According to the SEC’s complaint, since at least March 2018 through the present, Cumberland has acted as an unregistered dealer by buying and selling crypto assets offered and sold as securities for its own accounts as part of its regular business. As alleged in the complaint, Cumberland publicly calls itself “one of the world’s leading liquidity providers” in crypto assets and operates 24 hours a day, seven days a week by trading with counterparties by the telephone or through its online trading platform, Marea. The SEC’s complaint further alleges that Cumberland engages in trading crypto assets that are offered and sold as investment contracts on third-party crypto asset exchanges as part of its regular business.

Nano Magic: SEC Order Retroactively Terminating Trading Suspension

Blockbuster stuff from our friend Jacob Frenkel: today, the SEC issued an order granting Jacob’s client’s petition to retroactively terminate a trading suspension entered back in April 2020 in the matter of Nano Magic. That, by itself, is remarkable.

But a look at the administrative proceeding record in the matter (https://lnkd.in/gdY2Kawc) reflects a long and hotly contested litigation in which, among other things, Jacob and his team forced the Enforcement Staff to acknowledge that they misrepresented a fact in ex parte communications with the Commission when seeking approval for the trading suspension.

SBF’s FTX lieutenant Ryan Salame adds prison stint to LinkedIn resume

FTX cryptocurrency fraudster Sam Bankman-Fried’s top lieutenant made fun of the hard time he’s about to serve with a light-hearted post on LinkedIn.

Ryan Salame, who formerly served as co-CEO of FTX Digital Markets, will start a nearly eight-year prison term on Friday for making tens of millions of dollars in unlawful campaign donations to support Bankman-Fried’s political machinations.

NDAs

… the US Securities and Exchange Commission has a “whistleblower protection” rule that makes it illegal to punish or threaten anyone to stop them from reporting a potential securities law violation, and it interprets that rule to mean that an NDA itself could be a threat to whistleblowers unless it has a paragraph explicitly saying “oh but feel free to tell the SEC about any potential securities law violations….”

If you are a company and you have sloppy legacy NDAs, what can you do about it? What if you don’t even know? If you have a lot of employees and have been around for a long time, what are the chances that somewhere, sometime, some former employee signed, or even saw, a policy saying “keep our information confidential” that did not immediately go on to say “except from the SEC, if it’s fraud”? Do you just have to wait for the SEC to fine you?

A reader who used to work at an accounting firm sent me a mailing that he received from his old firm, saying “we would like to make sure that you are aware that nothing in any agreement, plan or policy of [the firm]” prevents him from whistleblowing to the SEC, or otherwise going to law enforcement. Just sort of a one-paragraph unilateral update to any NDA, employment agreement, severance agreement, etc., that he might or might not have, that might or might not have said “keep our information confidential.” I assume that everyone who has ever worked in or near the financial services industry in the US has gotten a mailing like that, or will soon. If you don’t, probably call the SEC!

Nearly 50% of U.S. Investors Plan to Invest in Crypto ETFs: Charles Schwab Survey

U.S. investors are very much keen on investing in exchange-traded funds (ETF) that hold cryptocurrencies, a new survey commissioned by financial services giant Charles Schwab showed on Thursday.

Some 45% of respondents said they plan to invest in crypto via ETFs over the next year, up from 38% a year earlier, surpassing demand for bonds and alternative assets. Only U.S. equities fared better, with 55% of participants planning to invest.