The SEC has moved to shut down a Ponzi scheme run by a Mother-Son AI-powered crypto investment company who allegedly raised more than $12M from retail investors on the idea to use an AI “supercomputer” to invest the funds.
Joy and Brent Kovar of Profit Connect Wealth Services Inc. claimed that their non-existent “Supercomputer” could give guaranteed annual returns up to 30%, SEC said in a civil complaint unsealed on Friday
Since May 2018, the duo has touted the technological capabilities of their company to about 277 retail investors. They tap into their retirement funds and pull equity out of their homes with promising 30% plus monthly compounded interest.
“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 ‘supercomputer,’” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office. “Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss.”
However, says the complaint, the defendants did not actually use the money to trade securities or buy cryptocurrencies. Instead, they allegedly transferred millions of dollars to Joy Kovar’s personal bank account. They paid millions to promoters, and made Ponzi-like payments to other investors.
The complaint alleges that Profit Connect actively encourages investors to use money from retirement funds and home equity. They targeted investors looking to build educational funds for their family.
The SEC filed an emergency action and obtained a temporary restraining order. They freeze assets to halt the alleged ongoing offering fraud by Joy and Brent Kovar and their firm.