The U.S. Securities and Exchange Commission has charged Nathan Fuller, a Texas man, with orchestrating an alleged $12.3 million fraud that promised investors AI-powered cryptocurrency trading returns while funneling most of the money to personal expenses and Ponzi-like payouts.
The SEC filed its complaint on May 28, 2026, in the U.S. District Court for the Southern District of Texas (Case No. 4:26-cv-04237), according to Litigation Release No. 26558. The agency alleges Fuller raised the funds from approximately 150 investors between at least October 2022 and mid-2024 through two entities: Privvy Investments LLC and Gateway Digital Investments.
What the SEC Alleges in the $12.3 Million Case
The SEC claims Fuller marketed an AI-driven trading bot that would generate consistent returns by trading cryptocurrency on behalf of investors. In reality, the complaint alleges, no such AI trading system existed.
Of the funds raised, the SEC alleges Fuller misappropriated at least $6.2 million for personal expenses. An additional $5.5 million allegedly went to Ponzi-like payments, using new investor funds to pay earlier participants and create the illusion of legitimate returns.
The complaint alleges only approximately $380,000, roughly 3% of total investor funds, was ever used to purchase cryptocurrency. Those trades were made without AI bots and generated no profit.
Funds Actually Invested in Crypto (Alleged)
Only ~$380,000 of the $12.3 million raised ever bought crypto assets — and those trades generated no profit, according to the SEC complaint.
The charges include violations of Securities Act Sections 5(a), 5(c), and 17(a), as well as Exchange Act Section 10(b) and Rule 10b-5. The SEC seeks injunctions, disgorgement, prejudgment interest, and civil penalties. All charges are allegations pending legal process.
How the Alleged AI Crypto Trading Scheme Worked
Fuller allegedly pitched investors on an automated, AI-powered system that would trade crypto assets and deliver reliable returns. The marketing emphasized algorithmic sophistication and hands-off investing, a pitch that has become increasingly common as public interest in AI-driven finance grows.
The gap between promise and practice was stark. With 97% of investor capital never touching a crypto exchange, the alleged scheme relied almost entirely on incoming deposits to sustain the appearance of profitability. New investor money funded “returns” to earlier participants, the hallmark of a Ponzi structure.
The case echoes patterns that U.S. regulators have flagged repeatedly. The CFTC’s Office of Customer Education and Outreach has warned that “fraudsters are exploiting public interest in artificial intelligence (AI) to tout automated trading algorithms, trade signal strategies, and crypto-asset trading schemes that promise unreasonably high or guaranteed returns.” The warning underscores a growing problem as AI-related claims proliferate across the crypto industry.
Red flags investors could have spotted include guaranteed or unusually consistent returns, lack of audited performance records, opaque fund management, and reluctance to allow withdrawals. These patterns appear repeatedly in enforcement and cybersecurity discussions across the crypto space.
What This Means for Crypto Investors and the Industry
The SEC’s case against Fuller is part of a broader enforcement push targeting crypto-related fraud, particularly schemes that leverage AI buzzwords to attract retail investors. For crypto firms that legitimately use AI in trading or analytics, the case raises the compliance bar on marketing claims.
The legal trajectory may be significant. A Department of Justice release from September 2025 revealed that Fuller was denied bankruptcy discharge of more than $12.5 million in debts after admitting in court that he operated Privvy as a Ponzi scheme. That admission could strengthen the SEC’s civil case considerably.
For the roughly 150 affected investors, recovery prospects depend on disgorgement proceedings and any remaining assets. The SEC’s request for prejudgment interest signals regulators intend to pursue full financial accountability.
The case arrives as crypto market sentiment sits at depressed levels, with the Fear & Greed Index registering 23, or “Extreme Fear.” In that environment, schemes promising guaranteed AI-generated returns may find especially receptive audiences among investors seeking safe havens, making trusted, transparent financial infrastructure more important than ever.
Crypto firms using AI language in promotions should treat this enforcement action as a compliance signal. Unsubstantiated performance claims tied to AI trading carry real regulatory risk, and the SEC has demonstrated willingness to pursue cases years after the alleged conduct began.
The next milestones in the case will be Fuller’s response to the complaint and any preliminary injunction hearings in the Southern District of Texas.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
