The founder of the American Bitcoin Academy was charged with crypto fraud by the Securities and Exchange Commission on February 2.
In a press release published by the SEC, the agency noted that Brian Sewell, founder of American Bitcoin Academy, convinced his students to invest in a crypto hedge fund he said would use artificial intelligence to generate returns.
Sewell’s Crypto Fraud Scheme
Sewell urged his students to invest in the Rockwell Fund, a hedge fund he claimed would utilize AI and cryptocurrency-related trading strategies for profit. Despite receiving approximately $1.2 million from 15 students, Sewell did not launch the fund.
Instead of starting the fund, Sewell converted the investments into Bitcoin, later suffering the loss of those funds when his digital wallet was compromised.
The fraud scheme led the SEC to take decisive action. The regulatory agency accused Sewell and his company, Rockwell Capital Management, of fraud, leading to a settlement in which they neither admitted nor denied the charges.
“Among other things, he falsely claimed that his investment strategies would be guided by his own ‘artificial intelligence’ and ‘machine learning’ technology which, like the fund itself, never existed,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement.
Rockwell Capital Management is set to pay $1.6 million, while Sewell will contribute $223,229 to resolve the crypto fraud charges brought by the SEC.
The SEC said that Sewell sent students a 16-slide investor pitch deck containing numerous misrepresentations and omissions about the fund.
Within the pitch deck, Sewell falsely asserted that he had earned degrees in data science from Johns Hopkins University and Stanford University.
Sewell additionally informed investors that he had previously overseen a crypto hedge fund, claiming to have transformed an initial $250,000 into $9 million.
“Sewell’s representations were false,” the SEC’s complaint read. “As Sewell was well aware, he had no prior experience managing a hedge fund.”
The SEC’s Ongoing Scrutiny of Cryptocurrency Practices
The enforcement action represents the most recent in a series of cases initiated by the SEC related to digital assets. SEC Chair Gary Gensler has consistently warned investors about the alleged prevalence of fraud in the cryptocurrency industry.
Last week, members of Congress sought to eliminate Staff Accounting Bulletin 121 (SAB 121) from the SEC. The bulletin imposes restrictions on banks intending to retain their clients’ crypto assets, mandating the inclusion of these assets on the banks’ balance sheets.
Chair @GaryGensler’s SAB 121 has virtually blocked banks from serving as custodians of digital assets. Today, @RepWileyNickel, @SenLummis, and I introduced resolutions to repeal @SECGov‘s terrible bulletin.
SAB 121’s days are numbered – it’s time for it to go! pic.twitter.com/jTQDdbMm3I
— Rep. Mike Flood (@USRepMikeFlood) February 1, 2024
Representatives Mike Flood and Wiley Nickel, along with Senator Cynthia Lummis, introduced a resolution under the Congressional Review Act to revoke the SEC’s SAB 121. The resolution seeks to formally disapprove of the accounting rule, asserting that it lacks legal force.
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