SEC Charges Seven Firms With Defrauding Retail Investors of $14M

The U.S. Securities and Exchange Commission (SEC) has charged seven entities, including three purported crypto asset trading platforms and four investment clubs, for allegedly defrauding retail investors out of more than $14 million through a sophisticated social media driven investment scam.

According to the SEC, the scheme ran between January 2024 and January 2025 and mostly targeted U.S.-based retail investors. The defendants include crypto trading platforms Morocoin Tech Corp., Berge Blockchain Technology Co. Ltd., and Cirkor Inc., along with investment clubs AI Wealth Inc., Lane Wealth Inc., AI Investment Education Foundation Ltd., and Zenith Asset Tech Foundation.

The regulator filed the complaint in the U.S. District Court of the District of Colorado for violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. 

The SEC alleged that the entities engaged in a coordinated fraud scheme that was based on false trading platforms, falsified investment products, and false statements of regulatory approval.

How the scam worked

The SEC stated that the investment clubs lured victims with social media adverts and messaging applications like WhatsApp. The fraudsters presented themselves as financial experts and utilized group chats to gain the trust of investors by telling them what they purported to be AI-generated investment tips.

Once investors gained confidence, the clubs encouraged them to open accounts on the three crypto asset trading platforms. These platforms allegedly claimed to hold government licenses and offered what they described as “Security Token Offerings” tied to legitimate businesses.

In reality, the SEC says, no trading ever occurred. The platforms were fake, the token offerings were not real, and the companies were also fake. The defendants charged extra fees when investors tried to withdraw their money, which further increased the losses of investors.

The SEC claims the defendants misappropriated at least $14 million and moved the money abroad through a system of bank accounts and crypto wallets.

An alarmingly growing trend

SEC officials say the case highlights a growing trend of crypto-related scams that exploit social media, messaging apps, and emerging technologies such as artificial intelligence. 

Laura D’Allaird, Chief of the SEC’s Cyber and Emerging Technologies Unit, said the agency continues to see fraudsters using online communities and fake expertise to manipulate retail investors. The SEC is seeking permanent injunctions, civil penalties, and disgorgement of ill-gotten gains, along with prejudgment interest against several defendants.

The charges also come as U.S. authorities continue cracking down on crypto-related investment fraud. In a recent case, a federal judge sentenced Magdaleno Mendoza, a senior promoter of the IcomTech cryptocurrency Ponzi scheme, to nearly six years in prison. 

Prosecutors said Mendoza helped lure victims with promises of guaranteed returns and hosted recruitment events while collecting large sums of cash. That case, like the current SEC action, targeted working-class investors and relied heavily on trust-building tactics and false profit claims.

Investor caution remains critical

The SEC’s Office of Investor Education and Assistance has cautioned investors against unsolicited investment offers in social media and messaging platforms. 

The agency recommends that investors should check licenses, be skeptical of guaranteed returns, and check the background of anyone promising an investment opportunity with the help of official tools such as Investor.gov.

With crypto markets maturing, the regulators argue that awareness and due diligence are still needed in ensuring that retail investors are not exposed to more sophisticated scams.

Also Read: MEXC Once Again Faces Scrutiny on Premarket Scams Allegations

Follow The Crypto Times on Google News to Stay Updated!