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SEC Charges Rimar Capital for Fraudulent AI Trading Claims

On October 10, 2024, the Securities and Exchange Commission (SEC) took decisive action against Rimar Capital USA, Rimar LLC, CEO Itai Royi Liptz, and board member Clifford Todd Boro for defrauding investors. The firm raised nearly $4 million through false promises about their AI-driven trading platform. Between 2022 and 2023, Rimar marketed itself as utilizing artificial intelligence for automated trading in stocks, futures, and cryptocurrencies. However, this technology did not exist, and the firm’s claims about assets under management (AUM) and performance were inflated or false.

The Allegations:

The SEC found that Rimar Capital’s executives deliberately overstated key business metrics to attract investors. The firm’s assets under management were falsely reported as being between $16 million and $20 million when the real figure was far lower. They also exaggerated the firm’s use of artificial intelligence, claiming to offer automated trading for equities, futures, and crypto assets. In truth, Rimar LLC lacked any operational AI-powered trading platform. Many of these misrepresentations were used to obtain new investors for Simple Agreements for Future Equity (SAFEs), which allowed investors to gain future equity in the company.

Liptz and Boro allegedly disseminated fraudulent marketing materials and pitch decks to prospective investors, inflating Rimar LLC’s technological capabilities and past performance. Investors were promised returns derived from trading strategies that did not actually exist, and the reported profits were sourced from unrelated overseas entities. Furthermore, a portion of the funds raised through these SAFE agreements was misappropriated by Liptz for personal expenses, further compounding the fraudulent activity.

The SEC charged Rimar Capital USA and LLC, as well as Liptz and Boro, with multiple violations, including those under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. Key violations include:

  • Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, which prohibit fraudulent conduct in the offer or sale of securities.
  • Sections 206(1) and 206(2) of the Investment Advisers Act, which prohibit fraudulent conduct by an investment adviser.

Penalties:

  • Liptz was ordered to pay disgorgement of $213,611.25 and a civil penalty of $250,000, payable in installments.
  • Boro was fined $60,000, also payable in installments.
  • Both Liptz and Boro are barred from working in any capacity with broker-dealers, investment advisers, and other regulated entities for at least five years.

This case highlights the growing scrutiny from regulators on fraudulent claims, particularly those involving emerging technologies like artificial intelligence. As firms increasingly market AI-driven services, the SEC’s enforcement in this case sends a clear message that misleading investors will result in serious legal consequences.

You may read the release and order here.

About Michael Rasmussen

Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.  

Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include: 

  • Investment Adviser Compliance Essential for Chief Compliance Officers 
  • Foundations of Investment Adviser Compliance 
  • What is a “Security”? 
  • Investment Adviser Marketing Rule 
  • Regulation A – Exemption from Registration 
  • Regulation Crowdfunding – Exemption from Registration 
  • Regulation D – Exemption from Registration 

Michael can also be found on LinkedIn.

Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.