SEC Charges Privvy Founder Over $12.3 Million Fake AI… |

Why Did The SEC Charge Nathan Fuller?

The Securities and Exchange Commission charged Nathan Fuller, a Cypress, Texas resident, with raising about $12.3 million from roughly 150 investors through a crypto fraud scheme built around fake AI trading bots. Fuller, the founder and sole member of Privvy Investments LLC, allegedly solicited investors across 9 states and 2 foreign countries between October 2022 and mid-2024. He also operated under the assumed name Gateway Digital Investments. The SEC said Fuller told investors that proprietary AI-based bots could scan crypto trading platforms, identify small price gaps, and capture profits through high-frequency arbitrage. Investors were promised returns of 40% to 50% within 30 to 45 days. Some were told they could earn guaranteed profits of more than 100% in as little as 21 days. The agency alleges those claims were false. The bots did not operate as advertised, and any code that ran lacked AI and stop-loss functionality. Only about $380,000, or roughly 3% of investor funds, was used to buy crypto, and those trades generated no profit, according to the complaint.

Where Did The Investor Money Go?

The SEC alleges that Fuller misappropriated at least $6.2 million for personal spending, including a roughly $1 million house, gambling, trading cards, travel, and a Jeep. About $5.5 million was routed back to earlier investors in Ponzi-like payments. That payment structure is central to the case. The scheme was marketed as crypto arbitrage powered by automated AI systems, but investor returns were allegedly funded by money from later investors rather than profits from trading activity. To quiet investor concerns, Fuller allegedly claimed that Privvy held a Texas money-transmitter license and a surety bond, that investor funds were FDIC-insured, and that a professional-liability policy backed the venture. The SEC said none of those claims were true. The complaint says Fuller invented an insurer called Texas Guarantors & Securities and altered a genuine but short-lived biBERK certificate to show $5 million in professional-liability coverage, even though the policy excluded that coverage.

Investor Takeaway

The case shows how AI language can be used to disguise old fraud mechanics. The alleged scheme did not depend on advanced trading technology. It relied on guaranteed-return claims, fake insurance documents, false licensing statements, and payments to earlier investors using new investor money.

How Was AI Used In The Cover-Up?

The SEC also alleges that AI was used in the cover-up after the trading story began to break down. As investors tried to withdraw funds in June 2024, Fuller allegedly created a fake firm called Blockchain Audit Solutions. He then used ChatGPT to draft a phony letter telling investors their accounts had been moved and that they needed to complete “KYC verification” before receiving payouts, according to the complaint. That detail gives the case a wider regulatory angle. AI was not only part of the sales pitch. It was allegedly used to create official-looking communications that delayed withdrawals and gave investors the impression that an external compliance process was underway. The complaint fits a broader enforcement pattern in which fraud operators attach AI branding to crypto investment offers. The formula is direct: promise automated trading, claim proprietary technology, offer unusually high returns, and use technical language to reduce investor scrutiny.

Why Does The Bankruptcy History Matter?

The civil case follows earlier federal proceedings tied to Privvy. Last September, a Texas bankruptcy court denied Fuller a discharge of more than $12.5 million in debt after he admitted in those proceedings that he operated Privvy as a Ponzi scheme and fabricated documents to advance it. Fuller filed for Chapter 7 bankruptcy in October 2024 after investors sued him in Texas state court and a receiver seized his assets. The SEC’s complaint does not reference that bankruptcy judgment or his prior Ponzi admission. The SEC charged Fuller with violating registration and antifraud provisions of the Securities Act and the Exchange Act. The agency is seeking permanent injunctions, disgorgement with prejudgment interest, civil penalties, and a bar from participating in securities offerings. The case was assisted by the SEC’s Cyber and Emerging Technologies Unit, which was launched in early 2025 and has focused on fraud cases involving crypto, AI branding, and online investment schemes. For investors, the warning is clear: AI claims do not remove the need to verify licensing, custody, insurance, trading activity, and the source of promised returns.