Rimar Capital Settles with SEC Over Alleged AI Fraud Scheme

Rimar Capital LLC, along with its U.S. arm and executives, settled fraud charges with the United States Securities and Exchange Commission (SEC) after being accused of fabricating its artificial intelligence (AI) capabilities to raise nearly $4 million from investors.

The case was settled for $310,000, with the firm neither admitting nor denying the accusations.

SEC's Allegations of "AI Washing"

According to the SEC, Rimar's CEO, Itai Liptz, and board member Clifford Boro misled investors by using AI "buzzwords" to describe an AI-driven trading platform for cryptocurrencies, stocks, and futures.

Andrew Dean, co-chief of the SEC’s Asset Management Unit, highlighted the agency's vigilance against companies falsely marketing their technological abilities.

Dean stated, "As AI becomes more popular in the investing space, we will continue to be vigilant and pursue those who lie about their firms’ technological capabilities and engage in 'AI washing.'"

Platform Did Not Exist

Despite their claims, Rimar Capital had no functional trading platform for stocks or cryptocurrencies during the fundraising period, according to the SEC.

The agency further revealed that the firm falsely reported its assets under management as between $16 million and $20 million, whereas it had less than $2 million.

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False Performance Claims and Misappropriation of Funds

Additionally, Liptz and Boro allegedly exaggerated Rimar's performance, falsely stating the firm achieved a 46% compounded annual growth rate since 2015 in one of their pitch decks.

Liptz was also accused of misappropriating company funds for personal expenses that were supposed to be used for business purposes, such as developing a “Hedge Fund for everyone app.”

Financial Penalties and Industry Bar

Liptz agreed to a disgorgement payment of $213,600, in addition to a $250,000 civil penalty. He also faces a five-year ban from the industry.

Rimar LLC consented to be censured as part of the settlement, while the company and its executives agreed to a cease and desist order without admitting fault.