SEC files a lawsuit! Three fake platforms and four clubs defrauded retail investors of 14 million dollars.

The U.S. Securities and Exchange Commission (SEC) has filed lawsuits against three fraudulent encryption asset trading platforms and four investment clubs, accusing them of luring retail investors into group chats through social media advertisements, enticing investors to invest in fake platforms and counterfeit security tokens under the guise of AI stock recommendations, defrauding over $14 million. The scam tactics include fictitious government licenses, forged trading records, and charging fake withdrawal fees. The SEC is seeking a permanent injunction, civil penalties, and the recovery of ill-gotten gains.

Three-Stage Scam Chain from Social Media to WhatsApp

(Source: SEC)

The SEC indictment reveals a meticulously planned multi-phase fraud process, spanning from January 2024 to January 2025. This fraud model is not an isolated case but a typical investment confidence scam targeting retail investors in recent years. Laura D'Allaird, head of the SEC's enforcement division, stated: “This case highlights a common form of investment fraud that is being used to target retail investors in the United States, resulting in devastating consequences. Fraud is fraud, and we will take strong action against any securities fraud that harms the interests of retail investors.”

The first phase is social media traffic generation. The four investment clubs, AI Wealth, Lane Wealth, AIIEF, and Zenith, advertise on platforms such as Facebook and Instagram, claiming to provide high-return investment advice generated by artificial intelligence. These ads often promise enticing conditions such as “AI precision stock selection” and “20% monthly return,” along with false success stories and screenshots. The recommendation algorithms of social media enable these ads to accurately reach the target audience interested in investment and financial management.

The second stage is to build trust. After potential victims click on the advertisement, they are directed to join a WhatsApp group. In these group chats, scammers pose as financial professionals, posting so-called “AI analysis reports” and “recommended stocks” daily. To enhance credibility, they have accomplices within the group post fake profit screenshots, creating an atmosphere where other members seem to be making money. This social pressure and herd mentality are key to the success of the scam. After weeks of “nurturing and killing,” the victims' vigilance gradually decreases.

The third stage is guiding the investment. When the scammers judge that the victim has completely trusted them, they will recommend that they open accounts and deposit funds on one of the three “encryption asset trading platforms”: Morocoin, Berge, or Cirkor. The indictment states that these platforms falsely claim to have government-issued licenses and present fake regulatory documents and security certifications. In reality, these platforms have no legal registration at all, and all displayed trading data is fabricated.

Fraudulent Token Issuance and Withdrawal Traps

When victims deposit funds on a fake platform, the scam goes deeper. These investment clubs and platforms promote so-called “Security Token Offerings” (STOs), claiming they are issued by legitimate companies and promising high returns. In reality, these STOs and their issuing companies do not exist at all. The tokens purchased by victims are merely false numbers in a database, with no real value or blockchain record.

Worse still, when investors realize the problem and attempt to withdraw their funds, the scammers set up new obstacles. The indictment states that the defendants further asked the victims to pay advance fees such as “taxes,” “handling fees,” or “unfreezing fees” in order to withdraw. These fees range from thousands to tens of thousands of dollars, and victims are often forced to pay in order to get their principal back. However, even after these fees are paid, the funds still cannot be withdrawn, as the entire platform itself is a scam.

Full list of seven fraudulent entities sued by the SEC

three fake encryption asset trading platforms

Morocoin Tech Corp: Claims to be registered with the U.S. FinCEN, but is actually fictitious.

Berge Blockchain Technology Co. Ltd: Falsifying Singapore Regulatory License

Cirkor Inc: Fictional EU MiFID Compliance Certification

Four Investment Clubs

AI Wealth Inc: Focuses on “AI intelligent stock selection”, with over 2000 members in the WhatsApp group.

Lane Wealth Inc: Disguised as a “wealth management company”, offering false investment portfolios.

AI Investment Education Foundation Ltd: Lowering caution under the name of “Educational Foundation”

Zenith Asset Tech Foundation: Claims to be a “Technology Asset Foundation,” emphasizing blockchain technology.

1400 million USD funding flow and SEC legal action

According to reports, the defendants allegedly misappropriated at least 14 million USD from American retail investors and transferred these funds overseas through a series of bank accounts and encryption asset wallets. The flow of funds is extremely complex, often passing through multiple intermediary accounts and mixing services in an attempt to sever the tracking chain. Some of the funds were transferred to bank accounts in China, Southeast Asia, and Eastern Europe, while another portion was laundered through privacy coins like Monero.

The SEC has filed a lawsuit in the U.S. District Court for the District of Colorado, accusing the defendants of violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Specific charges include the issuance of unregistered securities, false statements, and misappropriation of client funds. The SEC seeks to issue a permanent injunction against all defendants and impose civil penalties, and demands that Morocoin, Berge, and Cirkor return the ill-gotten gains and pre-judgment interest.

The permanent ban means that these entities and individuals will be permanently prohibited from engaging in securities business. Civil fines can reach millions of dollars, calculated as a multiple of the illegal gains. The recovery of unjust enrichment will require the defendant to return the entire $14 million plus interest. However, since the funds have already been transferred overseas and the identity of the fraudsters may be false, the actual likelihood of recovery poses challenges.

How Investors Can Identify and Prevent Such Scams

The SEC's Office of Investor Education and Advocacy has issued an investor alert, reminding investors to be aware that criminals may use popular social media platforms and instant messaging applications to deceive investors. The alert specifically emphasizes that one should not rely solely on group chat information to make investment decisions, as this is the core reason for the success of such scams.

Key signs to identify a fake platform include: promises of excessively high returns (any promise of monthly returns exceeding 10% is almost certainly a scam), requests to deposit funds through non-traditional channels (a legitimate exchange will not require wire transfers to personal accounts), inability to withdraw normally or withdrawals requiring additional fees, and a very short website domain registration time with a lack of public team information.

The SEC encourages investors to use the official website to check the background information of anyone who offers or sells investment products to them. The site can be used to verify the registration status of investment advisors, brokers, and investment products. If a platform or individual cannot be found in the SEC or FINRA databases, it is almost certainly a scam.