The SEC strikes hard against the "AI Wealth Club" social eyewash! A $14 million encryption fraud case has been cracked.

The U.S. Securities and Exchange Commission (SEC) recently filed charges in a meticulously designed Crypto Assets scam case involving more than $14 million. The SEC accused three fraudulent Crypto Assets trading platforms: Morocoin Tech Corp., Berge Blockchain Technology Co. Ltd., and Cirkor Inc., along with four “investment clubs” including AI Wealth Inc., of colluding to deceive U.S. retail investors into depositing funds into completely fabricated trading platforms by advertising on social media, posing as “financial experts” in WhatsApp groups, and using AI-generated investment advice as bait. This case marks another significant enforcement action by the SEC in the realm of cyber and emerging technologies, even though the agency's overall enforcement activities related to Crypto Assets have decreased in the context of a regulatory shift under the Trump administration in 2025.

Scam Overview: The “Combination Punch” of Social Media, AI Hype, and False Platforms

According to the complaint filed by the SEC in the U.S. District Court for the District of Colorado, this scam operated at least from January 2024 to January 2025, exhibiting a high level of organization and deceit. The entire scheme began with enticing advertisements widely circulated on social media, claiming to offer high-return investment opportunities. Once investors showed interest, they were directed to exclusive groups on WhatsApp. In these groups, the scammers posed as professional financial advisors, gradually building trust by sharing so-called “AI-generated investment advice” and promising substantial profits.

After gaining initial trust, the second step of the scam unfolds. Victims are persuaded to open and fund trading accounts on platforms such as Morocoin, Berge, or Cirkor. The SEC points out that these platforms falsely claim to hold government-issued licenses, appearing legitimate and trustworthy. However, these platforms are merely carefully crafted phishing sites, with no real transactions taking place. To further extract funds, the scammers also launch non-existent 'security token offering' projects, falsely claiming that these projects are issued by legitimate companies.

When investors attempt to withdraw their funds, the final phase of the scam—“prepayment fraud”—is triggered. The platform demands additional fees from victims for various reasons, such as paying “taxes,” “margins,” or “unfreezing fees,” which leads to further losses. The SEC stated that through this series of complex operations, the defendants misappropriated at least $14 million in funds and transferred the money overseas through a complex network of bank accounts and Crypto Assets wallets.

The entities involved in the case and key steps of the fraud

Fake trading platforms (3):

• Morocoin Tech Corp.
• Berge Blockchain Technology Co. Ltd.
• Cirkor Inc.

Investment Club (4 entities):

• AI Wealth Inc.
• Lane Wealth Inc.
• AI Investment Education Foundation Ltd.
• Zenith Asset Tech Foundation

Four key steps of fraud:

1. Traffic generation: Posting false investment advertisements on social media.
2. Build Trust: Impersonate experts in WhatsApp groups and establish trust with “AI investment advice.”
3. Transfer: Guide to deposit funds into a fake trading platform or purchase non-existent “security tokens.”
4. Extraction: Requesting “prepaid fees” when withdrawing, resulting in secondary losses.

Market and Regulatory Background: Why Do Scams Flourish in the “Year of Compliance”?

The occurrence of this case is closely related to the complex transformation period of the crypto market in 2025. On one hand, the market is undergoing a structural shift from retail-driven to institutional. On the other hand, the regulatory framework in major global markets made significant progress in 2025, especially in the United States, where several key pieces of legislation were passed to provide clear rules for the market. However, during the transition between the old and new patterns, there is often a window period in which fraudulent activities attempt to exploit information gaps and investors' enthusiasm for new concepts.

The scammers meticulously selected “AI” and “security token” as the core narrative of the scam, which is no coincidence. The combination of AI and encryption is one of the most关注的技术趋势 in 2025, attracting significant attention and funding from smart contracts to decentralized computing. At the same time, “security token offerings” sound more formal and advanced than simply “trading coins,” easily misleading investors unfamiliar with regulatory details into thinking this is a gateway to the emerging compliant financial world. The fraudsters have taken advantage of the mystique and high return expectations that these cutting-edge concepts hold in the minds of ordinary investors.

From a regulatory perspective, the enforcement environment of the SEC was changing at the time this case occurred. Since Trump returned to the White House, the SEC has significantly reduced its enforcement actions against the crypto assets industry, with nearly 60% of crypto-related cases being withdrawn, suspended, or dismissed. Meanwhile, the advancement of legislation such as the Digital Asset Market Clear Act aims to clarify the regulatory divisions between the SEC and the Commodity Futures Trading Commission, which will provide clearer rules in the long run. However, during the current transitional phase, fraudsters may see an opportunity. Laura D'Allaird, head of the SEC's Cyber and Emerging Technologies Division, made a strong statement on this case—“Fraud is fraud”—indicating that despite potential adjustments in overall strategy, the agency's crackdown on blatant fraud that harms retail investors will not weaken.

Impact of Cases and Lessons for Investors: The Cost of Trust and Ways to Prevent

This $14 million fraud case not only caused direct economic losses to the victims but also impacted the industry's reputation and investors' confidence. It sharply reminds the market that while the industry is actively building a compliant image and attracting institutional funds (with enterprise-level Crypto Assets allocation reportedly exceeding $120 billion by 2025), “pig-butchering” style crimes targeting retail investors have not disappeared; instead, they have donned a more fashionable technological guise.

For investors, this case offers multiple profound lessons. The foremost point is: maintain extreme vigilance against unverified information in social media and crypto message groups. The SEC's Office of Investor Education has issued a warning, emphasizing that fraudsters may leverage popular social platforms and messaging apps to lure investors, and advises never to rely solely on group information for investment decisions. Secondly, verifying platform qualifications is crucial. The SEC encourages investors to use its officially established Investor.gov website to check the background information of anyone promoting or selling investment products to you. Finally, stay clear-headed about phrases like “guaranteed profit” and “AI smart stock recommendations.” As this case reveals, these are often bait, with the ultimate goal of diverting funds to false platforms entirely controlled by scammers.

From an industry perspective, this case may also have some indirect effects. It could prompt mainstream social media platforms to strengthen their review of financial investment advertisements. Meanwhile, compliant crypto asset trading platforms and financial service providers may place greater emphasis on their regulatory licenses and compliant operations as key selling points to differentiate themselves from unregulated platforms. At a macro level, such cases may also be used as arguments to support the necessity of maintaining strong regulation and enforcement against market fraud while encouraging innovation.

Future Outlook: SEC Enforcement Trends and Industry Compliance Processes

Looking ahead, SEC's enforcement actions in the encryption field are expected to feature a combination of “precise strikes” and “strategic adjustments.” On one hand, for clear-cut cases of retail investor fraud represented by this case, the SEC is likely to continue its tough stance, seeking permanent injunctions, civil fines, and the recovery of illegal gains. On the other hand, in areas where there are disputes regarding business models or token attributes within the industry, its enforcement activities may be more prudent, in coordination with the legislative process in Congress (such as the advancement of the “Clarity Act”) and higher-level policy directions (such as the Trump administration's tone of “promoting innovation”).

For the crypto industry, 2025 is referred to as the “Year of Compliance Breakthrough.” Globally, the regulatory puzzle is gradually being completed, from the EU's MiCA framework to the US's GENIUS Act and the Clarity Act. The ultimate goal of these regulations is to bring crypto activities into a transparent and supervised system. The exposure of this fraud case demonstrates, from the opposite perspective, the importance of a sound regulatory framework and effective law enforcement in protecting investors, eliminating bad coins, and promoting the healthy development of the industry. Only when the space for fraud is significantly compressed can projects that are truly committed to technological development and financial innovation gain a fairer competitive environment and more lasting social trust.

Ultimately, this $14 million fraud case is not only a legal matter that requires a judicial decision, but also a microcosm of the challenges faced by the crypto industry in its journey towards maturity. It reveals the urgency of investor education, the complexity of regulation, and the necessity for the industry to self-purify in a field where technological advancement and financial greed go hand in hand. As the case progresses, its ultimate outcome will provide a reference for the handling of similar cases in the future and serve as a footnote in the evolution of crypto regulation.