SEC Sues Privvy Investments in $12.3M Crypto Fraud Case

Privvy Investments LLC and its Texas-based founder Nathan Fuller are now in the SEC’s crosshairs after the agency filed a federal lawsuit on May 28 alleging Fuller defrauded roughly 150 investors out of $12.3 million through a crypto scheme that leaned on fabricated AI trading bots, impossible return promises, and what the complaint describes as a Ponzi-like payment structure. The case lands in the U.S. District Court for the Southern District of Texas, and it isn’t the first time Fuller has faced consequences for how he ran Privvy, a bankruptcy court already denied him discharge of more than $12.5 million in debt after he admitted the whole thing was a fraud.

What Did Privvy Investments Actually Promise?

Privvy Investments promised investors proprietary AI-based trading bots that could scan cryptocurrency markets around the clock, execute high-frequency arbitrage trades, and protect capital through built-in stop-loss coding. Fuller allegedly specified returns of 40% to 50% within 30 to 45 days, with some investors told gains could exceed 100% in under a month.

These weren’t vague marketing claims. They were specific, repeatable, and aggressive, exactly the type of guarantees that legitimate trading firms never make. The promise of consistent algorithmic returns served as the hook that brought roughly 150 investors into the scheme over nearly two years.

There was also an insurance angle. Investors were led to believe their capital was protected. The SEC’s complaint doesn’t mince words: those representations were false. All of them.

Fuller operated under several assumed business names, Privvy Investments fake AI trading bot fraud and Gateway Digital Investments among them, which gave the operation a veneer of legitimacy across different investor audiences. The passive joint-venture interests he sold ran from at least October 2022 through mid-2024, a span of nearly two years during which the gap between the pitch and reality was never disclosed.

The underlying operation? Essentially nonexistent. Of the $12.3 million raised, only about $380,000, roughly 3%, was ever used to purchase cryptocurrency. The advertised bots were not involved in those purchases. The trades generated no profits.

Fuller told investors that proprietary AI-based trading bots could scan crypto markets, execute high-frequency arbitrage trades and limit losses through stop-loss coding.

Where the $12.3 Million Actually Went

This is the part of the story that deserves more attention than the AI-bot angle. The SEC alleges Fuller misappropriated at least $6.2 million for personal use, a figure that covers the purchase of a home, gambling, travel, and vehicles. Not exactly what investors signed up for when they handed over capital to a supposedly sophisticated arbitrage operation.

The remaining roughly $5.5 million was cycled back out as Ponzi-like payments to earlier investors. That’s the classic mechanism: use new money to pay old money, maintain the appearance of returns, keep the scheme alive long enough to extract more. It works until withdrawal requests accumulate faster than fresh capital comes in.

And that’s when things got creative. As investors began asking questions and requesting withdrawals, Fuller allegedly manufactured fabricated account statements showing gains that didn’t exist. He referenced fictitious entities. He used artificial intelligence, not for trading, but to generate a letter from a purported auditing firm claiming investor accounts were under review and would eventually be liquidated into a trust. The AI that was supposedly trading crypto was actually being used to forge documents.

Call it a fitting irony. The most sophisticated use of technology in this entire scheme was producing fake paperwork.

Privvy Investments and the Bankruptcy Case That Came First

The SEC lawsuit didn’t arrive in a vacuum. Before the agency filed its federal complaint, Fuller had already gone through bankruptcy proceedings, and lost. The Nathan Fuller crypto Ponzi scheme Texas bankruptcy discharge denied case ended with a court refusing to discharge more than $12.5 million in debt. Fuller had admitted in that proceeding that he operated Privvy as a Ponzi scheme and that he had fabricated documentation.

That admission matters. It’s not the SEC alleging bad intent from circumstantial evidence, it’s Fuller himself on record, in a federal court proceeding, confirming the fraud. The Justice Department cited those court records when describing the outcome of the bankruptcy case.

The sequence here is notable: Fuller ran the scheme from October 2022 to mid-2024, was denied bankruptcy relief, and is now facing civil enforcement from the SEC on top of it. The investors who never recovered their funds are watching this unfold through multiple court proceedings without any certainty of getting paid back. Disgorgement orders are one thing; actually collecting is another.

Roughly 150 people handed over money on the basis that AI could print guaranteed returns. The guarantee was the only real thing about any of it.

What the SEC Is Seeking Against Nathan Fuller

The SEC enforcement action against Nathan Fuller charges Fuller with violating the registration and antifraud provisions of federal securities laws. The agency is asking the court for permanent injunctions to bar Fuller from future securities offerings, disgorgement of ill-gotten gains, civil monetary penalties, and a complete ban on participating in any securities offering going forward.

Disgorgement in particular is worth watching. Courts have increasingly scrutinized whether fraud defendants actually have assets to disgorge, and given that $6.2 million allegedly went toward a home, gambling, and travel, there’s a real question about what recovery looks like for the 150 investors who are still out their money.

The SEC’s cyber and crypto assets enforcement unit has been active. Fake AI trading schemes have become a specific pattern the agency is targeting, and this case fits a recognizable template: inflated technology claims, guaranteed returns framed around algorithmic trading, and a Ponzi structure beneath. The agency has made clear it views AI-washing, using AI buzzwords to dress up fraud, as a securities law violation, not just a marketing exaggeration.

Fuller’s use of AI to generate fake audit letters is probably the detail that stings the most for regulators. It’s one thing to lie about having bots. It’s another to deploy the actual technology to manufacture the paperwork that covers up the lie.

How Does an AI Trading Bot Fraud Scheme Work?

AI trading bot fraud follows a predictable architecture. The promoter claims proprietary software can identify arbitrage opportunities in cryptocurrency markets faster than any human trader, executing positions at high frequency with built-in risk management. The returns promised are always aggressive, typically well above any legitimate trading strategy, and are usually framed as consistent, not speculative.

Investors are drawn in by the combination of technological credibility and certainty. Crypto markets genuinely do have price discrepancies across exchanges that algorithmic systems can exploit. That part is real. What fraudsters do is attach those real concepts to fictional systems, collect capital, and either spend it or cycle it back as fake returns until the structure collapses.

In Fuller’s case, the bots simply did not exist. The $380,000 actually deployed into crypto, just 3% of total investor funds, was traded manually, without any algorithmic assistance, and generated nothing. Every monthly statement showing gains was fabricated. Every promise about stop-loss protection was invented. The technology was the cover story, not the product.

The SEC’s complaint describes a scheme that ran for nearly two years precisely because the documentation appeared credible. Investors received statements. They received explanations. When the explanations stopped making sense, they received AI-generated letters from fake auditors. The sophistication wasn’t in the trading, it was in the delay.

This article is for informational purposes only and does not constitute investment advice. Every investment and trading decision involves risk. Readers should conduct their own research before making any financial decisions.