SEC Shuts Down 'Artificial Intelligence Supercomputer' Investing Scam
A mother and son said they would use the supercomputer to recommend investments in cryptocurrency and other assets, the SEC says.
The Securities and Exchange Commission on Monday obtained an emergency action, temporary restraining order and asset freeze to halt an alleged fraudulent offering in which a mother and sun told backers they would use an “artificial intelligence supercomputer” to invest their money.
The action, which involved Las Vegas-based Profit Connect Wealth Services Inc. and Las Vegas resident Joy I. Kovar and her son, Brent Kovar, has raised more than $12 million from at least 277 retail investors.
The complaint alleges that Profit Connect actively encourages investors to use money from retirement funds and home equity, and targets investors looking to build educational funds for their families.
According to the SEC’s complaint, which was filed in U.S. District Court for the District of Nevada and unsealed July 16, the defendants have raised investor funds through Profit Connect since at least May 2018 while assuring investors that their money would be invested in securities trading and cryptocurrencies based on recommendations made by an “artificial intelligence supercomputer.”
As alleged, “Profit Connect claims that its supercomputer consistently generates enormous returns, which in turn allows Profit Connect to guarantee investors fixed returns of 20-30 percent per year with monthly compounding interest,” the order states.
According to the complaint, however, more than 90% of Profit Connect’s funds came from investors.
The complaint further alleges that the defendants did not use funds received from investors to trade securities, buy cryptocurrencies, or do any of the things that Profit Connect promised its investors it would do with their money.
Instead, the complaint alleges “that the defendants misused investor money by, among other things, transferring millions of dollars to Joy Kovar’s personal bank account, paying millions of dollars to promoters, and making Ponzi-like payments to other investors.”
“As we allege, the defendants targeted investors who were looking for safe products for their retirements and their children’s educations, offering a money back guarantee on top of the phenomenal results they promised to achieve using a purported ‘super computer,’” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, in a statement. “Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss.”
On July 14, the court granted the SEC emergency relief against the Kovars and Profit Connect, including a temporary restraining order and an order freezing their assets.
A hearing is scheduled for July 26 to consider, among other things, whether to continue the asset freeze, issue a preliminary injunction, order an accounting and appoint a receiver over Profit Connect, the order states.