The Securities and Exchange Commission (SEC) has pressed new charges against Brian Sewell, the founder of American Bitcoin Academy, for cryptocurrency fraud targeting students of his so-called online Bitcoin academy.
In the SEC press release announcing the accusation on February 2, 2024, the commission indicated that Brian Sewell and his company Rockwell Capital Management have offered to settle the case for $1.6 million and $223,000 in civil penalties, both subject to court approval. While commenting on the allegations, Gurbir S. Grewal, the SEC Director of Enforcement, stated the commission will continue to go after those using ‘attention-grabbing technologies’ to orchestrate scams against the investing public.
“Whether it’s AI, crypto, DeFi or some other buzzword, the SEC will continue to hold accountable those who claim to use attention-grabbing technologies to attract and defraud investors,” Director Grewal said in the press release.
What Did Brian Sewell Do?
Brian Sewell is the brain behind the American Bitcoin Academy and Rockwell Capital Management. He marketed the former as an institute for learning about making money with Bitcoin, while the latter would be behind Rockwell Fund, a cryptocurrency trading hedge fund Sewell promised investors would launch. Sewell would market his Rockwell Fund to students of his American Bitcoin Academy program and convince them to invest by promising to generate unrealistically high returns using trading technologies like artificial intelligence and machine learning.
Additionally, the SEC alleged that Brian Sewell and Rockwell Capital Management failed to create a cryptocurrency hedge fund despite making promises to investors. Also, his AI and machine learning trading technologies never existed, and he instead only held investors’ funds in Bitcoin.
“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,” Gurbir S. Grewal, the SEC Direct of Enforcement, further explained in the announcement.
The conspiracy started to unravel when the digital wallets holding the invested funds to Brian Sewell’s Rockwell Fund were compromised and looted, ending the purported plans to launch a new cryptocurrency hedge fund. Subsequently, the SEC charged Brian Sewell and his firm with scamming 15 students of the American Bitcoin Academy for $1.2 million. Brian Sewell is yet to dispute any of the claims.
The Founder Proposes a $1.8 Million Settlement
In the same statement, the SEC also revealed that Brian Sewell and Rockwell Capital Management will settle the charges by paying disgorgement and prejudgment interest, including a civil penalty amounting to approximately $1.8 million. According to the terms of the agreement, Rockwell Capital Management agreed to pay a sum of $1,602,089 for disgorgement and prejudgment interest. On the other hand, Brian Sewell will settle the charges for a civil penalty of $223,229.
The settlement terms indicate that the defendants (Brian Sewell and Rockwell Capital) will not admit or deny any of the allegations in the SEC complaint. While the SEC appears to have accepted the terms of the agreement, it remains subject to approval by the US District Court for the District of Delaware.
SEC-Research Investment Opportunities
Towards the end of the statement announcing details of the alleged Bitcoin fraud, the US Securities and Exchange Commission brought public attention to the criticality of independently researching and verifying investment opportunities before giving out money. The warning included a hyperlink to a page on the Investor.gov website warning investors to check the background of anyone selling an investment.
The announcement charged the investing public to plug the names of investment professionals they’re considering doing business with into the search tool on the Investor.gov website to view information about histories of customer complaints, lawsuits by customers, past disciplinary actions by the SEC and sister agencies, and employment history with non-compliant firms.
Additionally, the SEC charged the public to be wary of investing in anyone convicted of a crime. Recall that the CFTC recently released a similar advisory warning customers against cryptocurrency scams promising to achieve unrealistic returns using artificial intelligence bots. With this SEC announcement, investors may want to watch out for scammers deploying this new technique.