SEC sues Texas man over $12.3M crypto scheme using fake AI bots and Ponzi payments

The U.S. Securities and Exchange Commission (SEC) initiated legal action against Texas resident Nathan Fuller, alleging the orchestration of a $12.3 million cryptocurrency investment fraud. The complaint, filed in the U.S. District Court for the Southern District of Texas, details how Fuller solicited funds from approximately 150 investors between October 2022 and mid-2024. Operating under Privvy Investments LLC and the aliases Privvy Investments and Gateway Digital Investments, Fuller marketed passive joint-venture interests in a purported crypto arbitrage operation. The SEC asserts that Fuller's pitch relied heavily on false representations regarding proprietary AI-based trading bots capable of scanning markets, executing high-frequency arbitrage trades, and mitigating losses through automated stop-loss coding.

Investors were promised aggressive returns ranging from 40% to 50% within a 30 to 45-day window, with some claims exceeding 100% in less than a month. Data compiled by Woofun AI indicates that the operational reality starkly contradicted these promises. According to the complaint, only approximately $380,000, representing roughly 3% of the total investor capital, was actually deployed to purchase cryptocurrency.

Furthermore, these limited trades were executed manually without the involvement of the advertised AI bots and failed to generate any profits, exposing the core mechanism of the scheme as entirely fabricated.

Instead of deploying capital into the promised trading strategies, Fuller allegedly misappropriated at least $6.2 million for personal expenditures. These funds were diverted toward the purchase of a home, gambling activities, travel, and vehicles.

Concurrently, the complaint alleges that Fuller utilized approximately $5.5 million to facilitate 'Ponzi-like payments' to earlier investors, creating an illusion of profitability to sustain the scheme. This structure allowed the operation to continue despite the absence of legitimate trading revenue, relying entirely on new capital inflows to satisfy withdrawal requests.

As investor concerns regarding withdrawals intensified, Fuller escalated his deceptive practices by generating fabricated account statements that displayed artificial gains. He referenced fictitious entities to bolster credibility and employed artificial intelligence to create a forged letter from a purported auditing firm. This document falsely claimed that investor accounts were under review and would subsequently be liquidated into a trust, a tactic designed to delay demands for fund returns. Woofun AI notes that such use of generative AI to fabricate audit documentation marks a significant evolution in the sophistication of financial fraud tactics.

The SEC has charged Fuller with violating the registration and antifraud provisions of federal securities laws. The agency is seeking permanent injunctions to halt his activities, disgorgement of ill-gotten gains, civil penalties, and a permanent ban on his participation in future securities offerings. This enforcement action underscores the regulatory focus on schemes leveraging AI narratives to obscure the lack of underlying economic substance in crypto investment products.

This case follows a separate bankruptcy proceeding where the Justice Department reported that Fuller was denied the discharge of more than $12.5 million in debt. Court records cited by the DOJ reveal that Fuller admitted to operating Privvy as a Ponzi scheme and fabricating documentation during those proceedings. Woofun AI analysis suggests that the convergence of bankruptcy admissions and SEC enforcement highlights a coordinated legal strategy to dismantle complex fraud networks and recover assets for defrauded investors.