The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Texas resident Nathan Fuller. The agency alleges that Fuller orchestrated a sophisticated $12.3 million crypto Ponzi scheme, defrauding approximately 150 investors with false promises of AI-powered trading bots.
The Illusion of AI-Powered Arbitrage
According to the complaint filed in the U.S. District Court for the Southern District of Texas, Fuller operated through Privvy Investments LLC (also doing business as Gateway Digital Investments) from October 2022 through mid-2024.
Fuller pitched investors on passive joint-venture interests in a purported crypto arbitrage trading operation. He claimed that proprietary, high-frequency AI trading bots could scan the markets, execute profitable trades, and mitigate losses using advanced stop-loss coding. Investors were promised eye-watering returns:
- Estimated returns of 40% to 50% within 30 to 45 days.
- Yields exceeding 100% in less than a month in select cases.
- Guaranteed capital preservation and insurance protections.
“This case highlights a dangerous trend where bad actors wrap classic Ponzi schemes in the trendy language of artificial intelligence to exploit retail investors eager for high returns.”
The Reality: Luxury Spending and Ponzi Payouts
The SEC’s investigation revealed that Fuller’s high-tech claims were entirely fabricated. No proprietary AI bots were ever deployed. Instead, the capital was distributed as follows:
Allocation of Investor Funds
- Only 3% (approx. $380,000) was used to buy cryptocurrency manually, yielding zero profits.
- Over $6.2 million was misappropriated by Fuller for personal luxuries, including a home, gambling, travel, and vehicles.
- About $5.5 million was used to make Ponzi-like payments to earlier investors to keep the scheme afloat.
Using AI to Cover Up the Fraud
As withdrawal requests mounted and investors grew suspicious, Fuller went to extreme lengths to conceal the fraud. He fabricated account statements showing non-existent gains and referenced fictitious financial entities.
In a modern twist, Fuller utilized generative artificial intelligence to draft a fake letter from a non-existent auditing firm. The letter claimed that investor accounts were undergoing a routine review and would eventually be liquidated into a trust.
The SEC has charged Fuller with violating registration and anti-fraud provisions of federal securities laws. The regulator is seeking permanent injunctions, disgorgement of ill-gotten gains, civil penalties, and a permanent ban on participating in future securities offerings. This follows a separate bankruptcy proceeding where the DOJ successfully blocked the discharge of over $12.5 million in debt after Fuller admitted to running Privvy as a Ponzi scheme.
Frequently Asked Questions (FAQ)
What is the SEC seeking in the lawsuit against Nathan Fuller?
The SEC is seeking permanent injunctions, disgorgement of all ill-gotten gains with prejudgment interest, civil penalties, and a ban prohibiting Fuller from participating in any future securities offerings.
Did the AI trading bots actually exist?
No. The SEC confirmed that no proprietary AI bots were ever used. The only AI involved in the scheme was used by Fuller to generate fake letters to stall worried investors.
How much money was lost in the Privvy Investments scheme?
Fuller raised $12.3 million from roughly 150 investors. While $5.5 million was returned as Ponzi payments, over $6.2 million was spent on Fuller’s personal expenses.
