Brian Sewell, a cryptocurrency course instructor, faces accusations from US regulators of deceiving 15 students into investing a total of $1.2 million into a fictitious hedge fund, as per the U.S. Securities and Exchange Commission (SEC). Despite Sewell's assurances of utilizing advanced technology, the purported hedge fund never materialized, leading to suspicions that Sewell misappropriated the funds.

Sewell, the founder of Rockwell Capital Management, promoted the non-existent hedge fund between 2018 and 2019, promising investors benefits. He claimed to leverage artificial intelligence (AI) and machine learning to boost investor returns. However, he allegedly left the funds dormant in Bitcoin, and his digital wallet was subsequently hacked, resulting in the loss of all funds.

Following these events, the SEC issued a broader warning to potential fraudsters in the crypto industry, emphasizing that exploiting the hype surrounding digital currencies will not be tolerated. The SEC is committed to regulating and prosecuting any fraudulent activities, regardless of the technology used to lure investors.

As a resolution, Rockwell Capital Management has decided to reimburse all affected investors the $1.2 million, along with an estimated interest of approximately $402,000. Sewell may also be required to pay a civil fine of $223,229, pending court approval.

This incident comes shortly after a warning from another US regulator, the Commodities and Futures Trading Commission (CFTC). The CFTC cautioned digital currency investors against expecting substantial returns in 2024 and urged them to be wary of enticing yet unrealistic promises from AI trading bots. The CFTC stresses the importance of approaching guarantees of high returns from bots, trade signal algorithms, crypto-asset arbitrage algorithms, and other AI-assisted technologies with caution.