AI washing: what the SEC has charged, and what it said

"AI washing" is the SEC's shorthand for claiming to use artificial intelligence when a firm does not, or overstating how it does. The SEC's published cases so far have been settled actions against investment advisers, and they turned on ordinary antifraud and marketing rules rather than on any AI-specific rule.¹² This page sets out what the releases say. It is not legal advice.

The first two cases: Delphia and Global Predictions

On 2024-03-18 the SEC announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., "for making false and misleading statements about their purported use of artificial intelligence (AI)."¹ The two firms agreed to pay $400,000 in total civil penalties: $225,000 for Delphia and $175,000 for Global Predictions.¹

According to the SEC's order against Delphia, the Toronto-based firm made false and misleading statements from 2019 to 2023 in its SEC filings, in a press release and on its website about its purported use of AI and machine learning that incorporated client data in its investment process.¹ In the order against Global Predictions, the SEC found that the San Francisco-based firm made false and misleading claims in 2023 on its website and on social media; the release says the firm falsely claimed to be the "first regulated AI financial advisor" and misrepresented that its platform provided "[e]xpert AI-driven forecasts."¹ Global Predictions was also found to have violated the Marketing Rule, which the release says prohibits a registered investment adviser from disseminating any advertisement that includes an untrue statement of material fact.¹

Without admitting or denying the findings, both firms consented to orders finding that they violated the Advisers Act, censuring them and ordering them to cease and desist.¹ SEC Chair Gary Gensler was quoted in the release: "We find that Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not."¹ The Director of Enforcement, Gurbir S. Grewal, used the phrase directly, saying the agency was "committed to protecting them against those engaged in 'AI washing.'"¹

Rimar Capital

On 2024-10-10 the SEC announced charges against Rimar Capital USA, Inc., Rimar Capital, LLC, its owner and chief executive Itai Liptz, and a Rimar USA board member, Clifford Boro.² The release says they made false and misleading statements about Rimar LLC's purported use of AI to perform automated trading for client accounts, along with other material misrepresentations, and agreed to settle and pay $310,000 in total civil penalties.²

According to the order, Rimar raised nearly $4 million from 45 investors for an investment adviser that "was falsely described as having an AI-driven platform for trading securities." The order also found misrepresentations about the adviser's assets under management and its investment returns.² Without admitting or denying the findings, the parties consented to an order finding antifraud violations. Mr. Liptz agreed to pay disgorgement and prejudgment interest totaling $213,611 and a $250,000 civil penalty, and Mr. Boro agreed to pay a $60,000 civil penalty.² A co-chief of the SEC's Asset Management Unit, Andrew Dean, said the agency would "pursue those who lie about their firms' technological capabilities and engage in 'AI washing'."²

What the SEC said about AI claims by public companies

The cases above involve advisers. For companies raising money from the public, the clearest statement in the record is a speech. On 2024-02-13 Chair Gensler told an audience at Yale Law School that if a company is raising money from the public, "it needs to be truthful about its use of AI and associated risk."³ He said claims about prospects should have a reasonable basis, that investors should be told that basis, and that when disclosing material risks about AI, "investors benefit from disclosures particularized to the company, not from boilerplate language."³ A speech states the speaker's own views, not a rule of the Commission.

Where enforcement sits

On 2025-02-20 the SEC announced a Cyber and Emerging Technologies Unit, replacing its Crypto Assets and Cyber Unit, with approximately 30 fraud specialists and attorneys.⁴ The first priority area the release lists is "fraud committed using emerging technologies, such as artificial intelligence and machine learning."⁴

Reading the cases

Three points follow from the releases themselves. The claims at issue were public statements: filings, a press release, websites and social media.¹ The violations charged were existing ones, such as antifraud provisions and the Marketing Rule.¹² And the orders were settled without admission or denial.¹² For how public companies are describing AI in their own filings, see the filings stream and the explainer on how to read an AI risk factor; the regulation tracker lists each release with its date.