The Securities and Exchange Commission has shut down a mother and son operation that raised more than $12 million from retailer investors by promising to use an AI "supercomputer" to invest the funds in securities trading and cryptocurrencies.
The SEC filed an emergency action and obtained a temporary restraining order and asset freeze to halt the alleged ongoing offering fraud by Joy and Brent Kovar and their firm, Profit Connect Wealth Services Inc.
According to a complaint filed by the watchdog in a Nevada court, since at least May 2018 the mother and son raised more than $12 million from at least 277 retail investors, claiming that their "supercomputer" generated "enormous returns".
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, 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, and targets investors looking to build educational funds for their family.
Michele Wein Layne, director, SEC Los Angeles Regional Office, says: "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 ‘super computer'."