‘Our AI Makes Money for Investors!’ SEC Cracks Down On B.S. Artists

The Securities and Exchange Commission (SEC) under President Biden continues to make an example of companies and individuals that don’t tell customers and investors the whole truth and nothing but. Two investment firms are the latest to feel the wrath of SEC enforcement and the resulting bad publicity.

Investment advisers Delphia (USA) and Global Predictions were charged by the SEC for making false and misleading statements, in violation of both the Advisers Act and Marketing Act, about how they use artificial intelligence (AI) to make money for their clients. The companies agreed to settle the cases and pay $400,000 in total civil penalties.

Companies in all kinds of sectors — especially finance — are exploring ways to implement AI and drive profits. No doubt, the majority of prospective customers will want to do business with firms on the cutting edge of technology. Just be careful: The fine line between creative and false marketing can’t be crossed.

Investors must sniff out phony baloney

The SEC charged Toronto-based Delphia with making false claims about its use of AI and machine learning from 2019 to 2023. Delphia boasted that it “put collective data to work to make our AI smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.” A quick check under the hood by SEC investigators found Delphia’s supposed AI super-predictor didn’t exist.

Global Predictions, headquartered in San Francisco, falsely claimed to be the “first regulated AI financial advisor” running on a platform that provides “[e]xpert AI-driven forecasts.” Global made those claims on its website and social media accounts in 2023. The company also lied about offering tax-loss harvesting services.

The SEC is warning investors about fraud involving AI and other technologies. An alert from the commission warns against believing “unrealistic claims like, ‘Our proprietary AI trading system can’t lose!’ or ‘Use AI to Pick Guaranteed Stock Winners!’ In reality, these scammers are running investment schemes that seek to leverage the popularity of AI. Be wary of claims — even from registered firms and professionals — that AI can guarantee amazing investment returns.”