SEC Charges Texas Man in $12.3 Million AI Crypto Fraud Scheme

The Securities and Exchange Commission has charged Cypress, Texas resident Nathan Fuller with orchestrating a $12.3 million investment fraud scheme that targeted approximately 150 investors [1]. Operating through Privvy Investments, LLC and the business name Gateway Digital Investments, Fuller allegedly lured participants between October 2022 and mid-2024 by promising high returns through proprietary AI-powered crypto trading bots [3].

Key takeaways

• Nathan Fuller allegedly raised $12.3 million from 150 investors across nine states and two foreign countries [3].
• The SEC claims Fuller misappropriated at least $6.2 million for personal expenses, including a home, gambling, and a Jeep [3].
• Investors were falsely promised guaranteed returns of 40% to 50% in 30 to 45 days, or over 100% in as little as 21 days [1].
• Only about $380,000 of the total funds raised was used for crypto trading, and those specific trades generated no profit [3].
• Fuller allegedly used ChatGPT to draft fake correspondence from a fictitious entity to delay investor withdrawal requests [3].

Deceptive tactics and the use of AI

Fuller’s pitch centered on the claim that his AI bots conducted high-frequency arbitrage trading to exploit price differences across crypto platforms [1]. According to the SEC, these claims were entirely false; the bots did not function as represented, and any code that existed lacked both AI and stop-loss capabilities [3]. To bolster the credibility of his scheme, Fuller allegedly provided investors with fabricated account statements and false assurances regarding institutional protections [1]. He claimed that investor funds were secured by a surety bond, backed by a professional liability policy, and insured by the Federal Deposit Insurance Corporation [2].

The SEC alleges that the operation functioned as a Ponzi scheme, with approximately $5.5 million of the raised capital used to make payments to earlier investors to maintain the illusion of profitability [3]. When the trading narrative began to fail in June 2024, Fuller allegedly created a fake firm called Blockchain Audit Solutions [3]. He reportedly used ChatGPT to generate a fraudulent letter informing investors that their accounts had been moved and that they were required to complete a "KYC verification" process before receiving any payouts [3].

Why it matters

This case highlights a growing trend of bad actors leveraging AI branding to add a veneer of technical sophistication to traditional fraud mechanics [3]. By pairing complex-sounding technology with promises of guaranteed returns and false insurance documentation, the scheme aimed to lower investor scrutiny [1]. The SEC is now seeking permanent injunctions, the disgorgement of ill-gotten gains with interest, and civil penalties against Fuller [3].

The legal proceedings follow a prior bankruptcy case in which Fuller admitted to operating Privvy as a Ponzi scheme and fabricating documents [3]. The current SEC action, supported by the agency's Cyber and Emerging Technologies Unit, serves as a warning that regulators are increasingly focused on the intersection of AI claims and crypto investment offerings [3]. For investors, the agency emphasizes that when a platform promises guaranteed returns from proprietary AI systems, the primary risk is not market volatility, but whether the technology exists at all [1].