By Nermeen Nabil Khear 
Rimar Capital is the latest to find itself in the crosshairs of the United States Securities and Exchange Commission (SEC), which has been cracking down on crypto trading platforms.
The crypto trading company came under scrutiny for AI washing, a marketing gimmick where companies exaggerate the use of AI in their products. These claims usually intend to mislead clients and potential investors.
Andrew Dean, Co-Chief of the SEC’s Asset Management Unit, emphasized that this crackdown is part of the regulator’s focus on protecting investors from fraudulent AI claims in financial markets. He said, “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’.”
SEC caught Rimar Capital in a classic case of AI washing
AI washing is against U.S. securities law, and the increasing popularity of the trend even led Gary Gensler, the SEC Chair, to address the issue in a recent video. The financial regulator emphasizes transparency in sectors like finance, where AI’s role in trading is becoming prevalent.
In a post made on its X account (formerly Twitter), the financial watchdog said it charged Rimar Capital USA, Rimar Capital, LLC, Itai Liptz, and Clifford Boro with making false claims about the alleged use of AI to perform automated trading of digital assets for customer accounts.
“Through entities he controlled, Liptz lured investors and clients with multiple fabrications, including with buzzwords about the latest AI technology,” said Andrew Dean.
Liptz, CEO of Rimar LLC and Rimar USA, alongside Boro, a Rimar USA board member, raised about $4 million for Rimar LLC after advertising the securities trading platform as AI-driven.
The parties agreed to settle with the SEC and pay over $300,000 in penalties; however, they never admitted nor denied the charges. In addition to the fines paid, Liptz was banned from holding any future executive roles in investment companies.
AI fraud has gone beyond financial markets
The Rimar Capital case is part of a broader pattern of companies making fraudulent claims using AI to attract investors.
In March 2024, the SEC took action against Delphia and Global Predictions for misleading claims about the use of artificial intelligence in their investment services. This was the regulator’s first enforcement action on AI washing and resulted in civil penalties of $400,000.
AI’s disruptive impact isn’t confined to the financial market; it is also a growing concern in election manipulation. This form of AI-driven fraud poses significant risks to democratic processes in similar ways to how AI washing poses risks to investors in financial markets.
The SEC’s Office of Investor Education and Advocacy via its Investor Alert publication warns investors about the rise in investment fraud using AI washing and other emerging technologies.
Although it can be difficult to spot AI fraud, the SEC’s recommendation is clear: all investments, especially those involving AI and other emerging technologies should be thoroughly investigated.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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