The attraction of high returns promised by pioneering technology like artificial intelligence can be tempting, particularly when it comes to cryptocurrency. However, a recent case involving an online crypto course founder serves as a strong reminder of the potential for fraud in this unregulated space. The SEC has accused Brian Sewell, the founder of a crypto-course, of misleading students and using stolen funds for personal gain. Here is a brief insight into this developing story.
- Brian Sewell, founder of an online crypto course, allegedly ran a Ponzi scheme, convincing students to invest in a fake AI-powered hedge fund.
- Students lost a total of $1.2 million, which was then converted to Bitcoin and subsequently lost in a hack.
- Sewell and his company agreed to settle with the SEC, totaling over $1.8 million in compensation and penalties.
The Allegations- Fake Hedge Fund and Lost Bitcoin
The US Securities and Exchange Commission has charged Brian Sewell, the founder of the American Bitcoin Academy, with defrauding 15 students out of a total of $1.2 million. According to the SEC, Sewell misled students into investing in a fictitious hedge fund called the Rockwell Fund, promising to use AI and other tools for maximizing their returns.
However, instead of launching the fund, Sewell allegedly converted the students’ investment into Bitcoin and held it in his personal wallet. Unfortunately, this Bitcoin was ultimately lost due to a hack, resulting in a complete loss for the trusting students. To further deceive the investors, Sewell supposedly sent them fabricated monthly account statements to create the illusion of a functioning fund, leading the students to believe it was a credible investment.
Sewell and his company, Rockwell Capital Management, have now agreed to settle the charges without admitting or denying the allegations. As part of the settlement, Rockwell Capital will pay back the stolen funds, i.e., the $1.2 million with interest, which would add up to $1.6 million. Moreover, Sewell will also be facing a civil penalty of over $200,000.
Caution for Investors
The SEC urges caution and detailed research before choosing to invest in crypto or any highly volatile asset and not solely rely on promises of high returns.
This case serves as a cautionary account for anyone who is considering investing in crypto or other highly volatile assets with promises of exorbitant returns. The SEC has highlighted its drive to protect investors and crack down on fraudulent activities in the crypto space.
In a statement, Gurbir Grewal, Director of the SEC’s Enforcement Division, declared that the regulatory authority would be holding individuals accountable for using buzzwords like AI, cryptocurrency, Decentralized Finance (DeFi), or any other attention-grabbing technology to attract and defraud investors. This statement must be taken as a warning and highlights the SEC’s vigilance in protecting investors from fraudulent schemes masked as new technological ventures.
Before this case, the US Commodities and Futures Trading Commission (CFTC) issued a warning to crypto investors looking for substantial returns in 2024. The CFTC cautioned against falling prey to exaggerated promises made by AI trading bots and other AI-driven technologies, such as algorithms for trade signals or crypto-asset arbitrage. This further highlights the ongoing concern held by regulatory bodies regarding potential scams using AI within the cryptocurrency space.
Celine Brooks is a renowned journalist and author specializing in cryptocurrency and blockchain technology. She holds a Master’s degree in Economics from Harvard University and is very passionate about Crypto. Celine regularly hosts webinars and workshops, sharing her insights and forecasts about the evolving digital currency landscape. She is also an active contributor to several leading financial and tech publications, where she breaks down complex crypto trends into understandable insights for everyday investors.