In what sounds like the plot from a poorly conceived comedy, an 86-year-old mother and her 54-year-old son have been accused of being part of a Ponzi scheme that promised to use supercomputers and AI to invest in securities trading and cryptocurrency.
According to the Securities and Exchange Commission’s complaint, Las Vegas-based Joy Kovar and her son Brent raised $12 million from at least 277 retail investors since May 2018 for a company with the suspiciously generic name of Profit Connect Wealth Services.
The pair allegedly encouraged investors to use money from their retirement funds, home equity, and educational funds for their families. Victims were lured by the promise of fixed returns of 20-30 percent per year with monthly compounding interest.
Those attractive returns were supposedly achieved through investment in traditional securities and cryptocurrency based on the recommendations of an “artificial intelligence supercomputer.” The Profit Connect website said it operated two of these machines, which it called “Orwell” and “Tesla”—failing to use the names “HAL 9000” and “Deep Thought” is disappointing.
The complaint alleges that none of the money raised by Profit Connect was invested. Instead, it funded the Kovars’ lavish lifestyle, including buying homes, cars and paying off credit card bills. $3 million of it went on commission to promotors who brought in investors, and some money was used in a Ponzi-like fashion to pay back investors that withdrew money from the scheme. Investigators say Joy Kovar transferred some $1.2 million to her own personal accounts and spent another $1.7 million on items for herself.
“Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss,” said Michele Wein Layne, director of the SEC’s Los Angeles regional office.
MarketWatch reports that Brent Kovar and one of his brothers had previously faced civil action from the SEC in 2009 in relation to Sky Way Global, LLC. The company raised millions from investors by telling them it had built anti-terrorism technology that would allow the government to monitor or take control of an airplane. Joy Kovar had served as a company secretary but wasn’t charged in that case.