Artificial intelligence has revolutionized financial markets, powering everything from robo-advisors managing retirement accounts to high-frequency trading algorithms executing millions of transactions per second. But this technological advancement has also opened the door to a new category of investment fraud that is costing investors billions of dollars.
In March 2024, the Securities and Exchange Commission took its first-ever enforcement action against AI-washing, charging two investment advisers with making false claims about their use of artificial intelligence. This landmark case signals the beginning of a new era in securities regulation and investor protection.
If you have lost money due to AI trading fraud, robo-advisor negligence, or algorithmic trading misconduct, you may have legal recourse. Our firm represents investors who have been harmed by the misuse of artificial intelligence in investment fraud and financial services.
Key Takeaways
- The SEC charged its first AI-washing cases in 2024, imposing $400,000 in combined penalties
- FINRA has made generative AI fraud a top regulatory priority for 2026
- Robo-advisors are held to the same fiduciary duty standards as human advisors
- AI-related securities cases surged in 2025, with 12 cases filed in the first half alone
- Legal claims are available under federal securities laws, state law, and through FINRA arbitration
What Is AI Trading Fraud?
AI trading fraud occurs when investment firms, broker-dealers, or platforms misrepresent their use of artificial intelligence or when AI-powered systems cause investor harm through negligence or misconduct. This emerging category of securities fraud takes several forms.
AI-Washing
The term “AI-washing” refers to false or misleading claims about the use of artificial intelligence in investment strategies. The SEC’s first enforcement actions targeted this exact misconduct. In March 2024, the commission charged Delphia (USA) Inc. and Global Predictions Inc. with making unsubstantiated claims about their AI capabilities.
Delphia claimed it used AI and machine learning to “make intelligent investment decisions” and “predict which companies and trends are about to make it big.” The firm agreed to pay a $225,000 civil penalty. Global Predictions, which touted itself as the “first regulated AI financial advisor” providing “expert AI-driven forecasts,” paid $175,000 to settle the charges.
SEC Enforcement Director Gurbir S. Grewal emphasized that firms claiming to use AI in investment processes must ensure their representations are not false or misleading. Connecticut regulators went even further, ordering an investment firm to pay a $700,000 civil penalty for fraudulently promising massive returns with its AI trading system that supposedly operated around the clock without risk of losses.
Robo-Advisor Negligence
Robo-advisors are automated investment platforms that use algorithms to provide financial planning services with minimal human supervision. While these platforms can offer cost-effective portfolio management, they are not immune from legal liability when they fail to meet their fiduciary obligations.
Robo-advisor negligence may include unsuitable investment recommendations, inadequate risk profiling, algorithm errors causing losses, failure to monitor portfolios, or insufficient disclosure of limitations and risks. Despite their automated nature, robo-advisors must comply with the same fiduciary duty standards that apply to human financial advisors under the Investment Advisers Act of 1940.
Algorithmic Trading Manipulation
High-frequency trading firms and institutional investors use sophisticated algorithms to execute trades at speeds impossible for human traders. When these systems are used to manipulate markets, investors suffer significant losses.
Common forms of algorithmic trading abuse include spoofing, where traders place orders they intend to cancel to create false market demand, layering multiple orders to manipulate prices, and quote stuffing to slow down competing traders. The Commodity Futures Trading Commission has actively pursued enforcement actions against firms engaged in algorithmic manipulation, including a $200,000 penalty against Flatiron Futures Traders for spoofing in equity index futures.
Deepfake Investment Scams
According to FINRA’s investor alerts, bad actors are increasingly using generative AI to create deepfake audio and video content that impersonates well-known finance personalities in fraudulent social media advertisements. These scams have become sophisticated enough to bypass detection by many investors.
Investment club scams create synthetic identities using AI-generated text, images, and voice to establish credibility. Account takeovers employ deepfake media to fraudulently access customer brokerage accounts. New account fraud uses AI-generated documentation to open accounts with stolen identities.
Warning: The FBI’s Internet Crime Complaint Center reports that investment fraud is now the costliest type of cybercrime in the United States, with complaints and losses continuing to rapidly increase year over year. Artificial intelligence is amplifying both the scale and sophistication of these schemes.
The Rise of AI Investment Fraud
The explosion of AI-related investment fraud is not an isolated phenomenon. Securities class action lawsuits involving AI surged dramatically in 2025, with 12 AI-related securities cases filed in just the first half of the year. This pace exceeds 2024’s full-year total of 15 cases, indicating accelerating litigation in this area.
Mega filings involving losses of at least $5 billion accounted for 83 percent of total disclosure losses and 91 percent of maximum losses in the first half of 2025, according to securities litigation tracking data. The financial stakes are enormous, and the regulatory response is intensifying.
FINRA has identified generative AI and cyber-enabled fraud as top priorities in its 2026 regulatory agenda, warning broker-dealers and registered investment advisers that emerging technology and long-standing compliance gaps are converging into higher risk for investors.
| Type of AI Fraud | Common Tactics | Primary Victims |
|---|---|---|
| AI-Washing | False claims about AI capabilities, fake algorithm performance | Retail investors, pension funds |
| Robo-Advisor Negligence | Unsuitable recommendations, inadequate risk assessment | Individual retirement accounts |
| Algorithmic Manipulation | Spoofing, layering, quote stuffing | Options traders, institutional investors |
| Deepfake Scams | Fake celebrity endorsements, impersonation | Social media users, elderly investors |
| Unregistered AI Platforms | Guaranteed returns, unlicensed trading bots | Inexperienced investors |
Who Is Liable for AI Trading Losses?
Determining liability when an AI system causes investment losses involves analyzing multiple parties in the chain of responsibility. Unlike traditional investment fraud cases with clear human defendants, AI trading fraud cases may involve complex questions about who bears legal responsibility for algorithmic failures.
The Financial Institution
The broker-dealer or registered investment adviser offering the AI-powered service typically bears primary responsibility. These firms have regulatory obligations under securities laws to ensure their systems are suitable, adequately disclosed, and properly supervised. They cannot escape liability simply by outsourcing investment decisions to algorithms.
The Software Developer
Companies that create trading algorithms or robo-advisor platforms may face liability if their software contains defects, biases, or inadequate safeguards. Product liability theories may apply when algorithmic failures cause investor harm, particularly if the developer made representations about the system’s capabilities that proved false.
The Individual Broker or Advisor
Even when using automated systems, individual financial professionals retain fiduciary obligations to their clients. An advisor who recommends an AI trading platform without adequate due diligence or who fails to monitor the platform’s performance may be personally liable for resulting losses.
The Platform Operator
Unregistered platforms offering AI trading services may face federal and state securities violations. Many fraudulent AI trading schemes operate without proper registration as broker-dealers or investment advisers, subjecting their operators to civil and criminal liability.
California Advantage: California’s securities laws provide strong protections for investors defrauded by AI trading schemes. California Corporations Code Section 25400 creates liability for sellers of unregistered securities and those who materially assist in securities violations, with a four-year statute of limitations for fraud claims.
Legal Claims Available to Victims
Investors harmed by AI trading fraud have multiple avenues for legal recourse. The appropriate claims depend on the specific facts of your case, the parties involved, and where the misconduct occurred.
Federal Securities Violations
The Securities Act of 1933 and Securities Exchange Act of 1934 provide remedies for investors who purchased securities based on material misrepresentations or omissions. Section 10(b) of the Exchange Act and SEC Rule 10b-5 prohibit fraudulent conduct in connection with securities transactions, including false statements about AI capabilities.
The Investment Advisers Act of 1940 imposes fiduciary duties on investment advisers, including those using robo-advisors or algorithmic trading. Advisers must act in their clients’ best interests, provide full and fair disclosure, and avoid conflicts of interest. AI-washing and inadequate disclosure of algorithmic limitations may violate these obligations.
State Securities Law Claims
State blue sky laws provide additional remedies beyond federal securities statutes. Many states have adopted the Uniform Securities Act, which creates liability for unregistered securities offerings, fraudulent practices, and breach of fiduciary duty by investment professionals.
California investors benefit from particularly strong state securities protections. The California Corporate Securities Law creates strict liability for certain violations and allows recovery of attorney fees and costs in successful actions.
Common Law Claims
Traditional common law claims remain available in AI trading fraud cases. Breach of fiduciary duty applies when an advisor or broker fails to act in the client’s best interest. Negligence claims arise when a financial professional fails to meet the applicable standard of care. Fraud and misrepresentation claims target intentional deception about AI systems or their performance.
Breach of contract claims may be appropriate when an investment firm fails to provide services as promised in its advisory agreement or terms of service.
FINRA Arbitration
Most brokerage agreements contain mandatory arbitration clauses requiring disputes to be resolved through the Financial Industry Regulatory Authority’s arbitration system. FINRA arbitration provides a faster alternative to court litigation and has specialized arbitrators with securities industry expertise.
FINRA arbitration is particularly well-suited for claims involving broker misconduct, unsuitable recommendations using robo-advisors, failure to supervise algorithmic trading activities, and misrepresentation of AI capabilities in investment products.
Federal Securities Claims
- Securities Act Section 12(a)(2)
- Exchange Act Section 10(b) and Rule 10b-5
- Investment Advisers Act violations
- Commodities Exchange Act claims
State and Common Law Claims
- California Corporate Securities Law
- Breach of fiduciary duty
- Negligence and gross negligence
- Fraud and negligent misrepresentation
How to Prove AI Negligence or Fraud
Successfully pursuing a claim based on AI trading fraud or robo-advisor negligence requires establishing specific elements of proof. These cases often involve technical complexity that demands both legal expertise and understanding of algorithmic trading systems.
Documenting the AI System’s Failures
Preserving evidence of how the AI system operated and where it failed is critical. Account statements showing unsuitable trades or excessive losses form the foundation of your case. Communications with the firm about the AI system, including marketing materials and disclosures, establish what representations were made.
If available, algorithm audit trails or system logs may reveal how trading decisions were made. Expert analysis of the algorithm’s logic and execution can demonstrate negligence or defects in the system’s design.
Establishing the Standard of Care
To prove negligence, you must show the applicable standard of care and how the defendant breached it. For robo-advisors, this includes demonstrating the firm’s obligations under the Investment Advisers Act and how its AI system failed to meet those requirements.
Industry standards for algorithmic trading and risk management help establish the baseline for acceptable conduct. Regulatory guidance from the SEC and FINRA provides additional benchmarks for evaluating whether a firm’s AI implementation was reasonable.
Proving Causation
You must demonstrate that the AI system’s failures or the firm’s misrepresentations actually caused your investment losses. This may require expert testimony showing that the losses would not have occurred but for the algorithmic malfunction or the firm’s fraud.
Market analysis can help distinguish losses caused by general market conditions from those resulting from AI negligence or manipulation. Trading pattern analysis may reveal that algorithmic errors generated unsuitable transactions that a prudent human advisor would have avoided.
Calculating Damages
Quantifying your losses requires detailed financial analysis. Out-of-pocket losses measure the difference between what you paid for the investment and its current value or sale price. Lost profits may be recoverable if you can show what gains you would have achieved with proper advice.
Consequential damages might include tax consequences from forced sales or opportunity costs from having capital tied up in losing positions. In some cases, punitive damages may be available for willful fraud or egregious misconduct.
Expert Testimony Is Essential: AI trading fraud cases typically require expert witnesses who can explain complex algorithmic systems to arbitrators or judges. Our firm works with financial experts, computer scientists, and trading system specialists who can analyze AI platforms and provide credible testimony about industry standards and technical failures.
Recent AI Trading Fraud Cases
The landscape of AI trading fraud litigation is evolving rapidly. Recent cases illustrate the types of misconduct courts and regulators are targeting.
Opendoor Algorithm Misrepresentation
In 2024, plaintiffs filed a securities class action against Opendoor alleging the company made misleading statements about its algorithm’s ability to adjust to market conditions. Investors claimed these misrepresentations led to significant financial losses when the algorithm failed to perform as advertised during changing market dynamics.
This case demonstrates how algorithm performance claims can form the basis for securities fraud litigation when the systems do not operate as represented to investors.
Flatiron Futures Traders Spoofing
The Commodity Futures Trading Commission ordered a Colorado trader and his firm, Flatiron Futures Traders, to pay a $200,000 penalty for spoofing in equity index futures. The case involved algorithmic trading strategies designed to create false impressions of market supply and demand.
Spoofing cases demonstrate that algorithmic trading does not provide a shield against enforcement for market manipulation tactics.
| Case | Type of Fraud | Outcome |
|---|---|---|
| Delphia (USA) Inc. | AI-washing false claims | $225,000 SEC settlement (2024) |
| Global Predictions Inc. | AI-washing misrepresentation | $175,000 SEC settlement (2024) |
| Connecticut AI Trading Firm | Fraudulent guaranteed returns | $700,000 state penalty |
| Flatiron Futures Traders | Spoofing via algorithms | $200,000 CFTC penalty |
The Regulatory Response to AI Trading
Financial regulators are scrambling to keep pace with the rapid adoption of artificial intelligence in investment services. Their enforcement priorities signal where future litigation is likely to focus.
SEC’s AI Initiative
The Securities and Exchange Commission has made AI oversight a strategic priority. The commission’s Division of Examinations incorporated AI-washing into its 2024 examination priorities following a 2023 sweep that identified numerous advisers making unsubstantiated claims about AI-driven portfolio management.
The SEC’s enforcement actions against Delphia and Global Predictions established that existing anti-fraud provisions apply fully to AI marketing claims. Firms cannot hide behind technological complexity to excuse false representations about their capabilities.
FINRA’s 2026 Priorities
The Financial Industry Regulatory Authority has elevated generative AI and cyber-enabled fraud to the top of its 2026 regulatory agenda. FINRA warns that broker-dealers face heightened risk from the convergence of emerging technology and persistent compliance gaps.
FINRA’s examination priorities include reviewing how firms supervise AI-powered recommendations, examining disclosure of algorithmic limitations to customers, and assessing cybersecurity measures protecting AI systems from manipulation or compromise.
Investment Adviser Act Application
The SEC’s Investor Advisory Committee has emphasized that robo-advisors and AI-powered investment services must comply with the full scope of the Investment Advisers Act of 1940. This includes the fiduciary duty to act in clients’ best interests, duty of care in making recommendations, duty of loyalty to avoid conflicts of interest, and duty to provide full and fair disclosure.
According to guidance from regulators, firms cannot disclaim responsibility for algorithmic investment decisions. The use of AI does not eliminate or reduce fiduciary obligations.
Transparency Requirements
Firms must disclose how AI systems work, their limitations, and the risks of automated decision-making.
Bias Testing
Algorithms must be tested for potential biases that could lead to discriminatory or unsuitable recommendations.
Cybersecurity Measures
AI systems require robust security to prevent manipulation, unauthorized access, or data breaches.
Why Our Firm for AI Trading Fraud Cases
AI trading fraud represents an emerging and complex area of securities litigation. Successfully handling these cases requires both traditional securities law expertise and understanding of how algorithmic trading systems actually function.
Insider Knowledge of Trading Systems
Attorney Gary Varnavides spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers, investment advisers, and financial institutions in securities disputes. This experience provides unique insight into how AI trading platforms are designed, implemented, and monitored by financial firms.
When you have defended the other side for a decade, you understand their playbook. You know how algorithms are tested, what risk controls firms implement, and where their systems are most vulnerable to failures. This insider perspective is invaluable in prosecuting claims against firms that have harmed investors through AI negligence or fraud.
Early-Mover Advantage
AI trading fraud is a rapidly emerging area of law. Most securities attorneys continue to focus on traditional investment fraud cases without specialized knowledge of algorithmic trading or robo-advisor systems. By establishing expertise in this niche now, our firm is positioned to provide sophisticated representation as this practice area expands.
The first wave of AI trading fraud cases is just beginning. The SEC’s 2024 enforcement actions marked the opening chapter of what will likely become a major category of securities litigation over the coming years. Investors need attorneys who have studied these issues and prepared for this evolution in financial fraud.
California Jurisdiction Advantage
Our firm is based in California, a major hub for financial technology innovation and home to many robo-advisor platforms and algorithmic trading developers. California’s courts have extensive experience with technology disputes and the state’s securities laws provide strong investor protections.
California Corporations Code Section 25400 creates favorable remedies for securities fraud victims, including the ability to recover attorney fees and costs in successful actions. The four-year statute of limitations for fraud claims provides a longer window for bringing cases than federal securities laws in many circumstances.
Recognized Legal Excellence
Gary Varnavides has been recognized as a Super Lawyers Rising Star from 2015 through 2023, an honor awarded to only 2.5 percent of attorneys in the New York Metro area. He is licensed to practice in California, New York, and New Jersey, allowing him to represent clients across multiple jurisdictions.
This combination of recognition, multi-state licensing, and specialized experience in securities litigation positions our firm to handle complex AI trading fraud cases effectively.
10 Years Defending Broker-Dealers Means We Know How AI Systems Fail: When you spend a decade defending financial institutions against investor claims, you gain deep insight into how trading algorithms are designed, tested, and supervised. We know what internal risk controls firms should have in place, how algorithmic failures typically occur, and what evidence to look for in building your case. This insider knowledge is your advantage.
Types of AI Investment Fraud We Handle
Our firm represents investors who have suffered losses from the full spectrum of AI-related investment misconduct.
Robo-Advisor Claims
- Unsuitable investment recommendations
- Inadequate risk profiling
- Algorithm errors causing losses
- Failure to monitor portfolio changes
- Insufficient disclosure of AI limitations
- Breach of fiduciary duty
AI-Washing Cases
- False claims about AI capabilities
- Overstated algorithm performance
- Nonexistent “proprietary AI” systems
- Misleading marketing about machine learning
- Fake backtesting results
- SEC and state enforcement violations
Algorithmic Trading Abuse
- Market manipulation via spoofing
- Layering schemes
- Quote stuffing
- Flash crash losses
- High-frequency trading misconduct
- Unauthorized algorithmic strategies
AI Investment Scams
- Deepfake celebrity endorsements
- Unregistered AI trading platforms
- Fraudulent trading bots
- Guaranteed return schemes
- Ponzi schemes disguised as AI trading
- Account takeover fraud
Signs You May Have an AI Trading Fraud Claim
Recognizing the warning signs of AI trading fraud can help you determine whether you have grounds for legal action. Consider consulting with an attorney if you have experienced any of these red flags.
Misrepresented AI Capabilities
The investment firm promised AI-powered returns or claimed proprietary algorithms that would outperform the market. Marketing materials emphasized artificial intelligence or machine learning as key selling points. You later discovered the firm had no real AI capabilities or exaggerated what its systems could do.
Unexplained Losses in Automated Accounts
Your robo-advisor account suffered significant losses that seem disconnected from general market performance. The platform made trades that appear unsuitable for your risk profile or investment objectives. You were not adequately informed about portfolio changes or risk exposure.
Suspicious Trading Patterns
Your account shows unusual trading activity, including excessive trading (churning), concentrated positions in high-risk securities, or trades that seem to benefit the firm more than you. Algorithmic trading in your account occurred without proper authorization or disclosure.
Inadequate Disclosure
The firm failed to explain how its AI system makes decisions or what limitations the algorithm has. You were not told about potential conflicts of interest or how the firm is compensated for algorithmic recommendations. Disclosure documents contained vague or misleading information about the role of AI in your investment management.
Regulatory Red Flags
The platform or firm was not properly registered with the SEC or FINRA. You later learned the firm faced regulatory enforcement actions or customer complaints. The AI trading system operated without adequate supervision or compliance controls.
Time Limits Apply: Securities fraud claims are subject to strict statutes of limitations. Federal securities claims generally must be brought within five years of the violation or two years after discovery. California securities fraud claims have a four-year statute of limitations. Waiting too long to consult an attorney may cost you the right to pursue your claim.
Our Investigation Process
When you contact our firm about potential AI trading fraud, we conduct a thorough investigation to evaluate your case and identify all available legal claims.
Initial Case Evaluation
We begin by reviewing your investment account statements, brokerage agreements, and communications with the firm. We analyze the trading activity to identify patterns of misconduct or negligence. We research the firm’s registration status and regulatory history.
This initial evaluation helps us determine whether you have viable legal claims and what theories of liability are most promising.
Technical Analysis
For cases involving robo-advisors or algorithmic trading, we engage expert consultants who can analyze the AI system’s operation. This may include reviewing the algorithm’s logic and decision-making process, testing for biases or errors in the system, evaluating whether the algorithm complied with industry standards, and assessing the adequacy of the firm’s supervision and risk controls.
Legal Research and Strategy Development
AI trading fraud cases often involve novel legal questions. We research applicable securities laws, recent enforcement actions, and developing case law in this area. We identify all potentially liable parties and evaluate which legal venues offer the best opportunities for recovery.
Our strategy development considers whether FINRA arbitration, federal court litigation, or state court proceedings provide the most favorable path forward for your case.
Demand and Negotiation
Many AI trading fraud cases can be resolved through negotiation before formal proceedings begin. We prepare a detailed demand letter outlining the misconduct, documenting your losses, and presenting the legal claims. Firms often prefer to settle claims quietly rather than face public arbitration or litigation.
If the firm refuses a reasonable settlement, we are prepared to pursue your claims through arbitration or litigation.
Fee Structure
We handle most AI trading fraud cases on a contingency fee basis. This means you pay no upfront attorney fees. We only get paid if we recover money for you through settlement or award. The fee percentage is discussed during your free consultation.
You remain responsible for case costs, which may include filing fees, expert witness fees, and deposition transcripts. We can discuss cost estimates and payment arrangements during your consultation.
This fee structure allows investors to pursue claims against well-funded financial institutions without the burden of paying hourly legal fees during the case.
Frequently Asked Questions
Can I sue a robo-advisor if it loses money?
You may have a claim if the robo-advisor made unsuitable recommendations, failed to adequately assess your risk tolerance, or made misrepresentations about its AI capabilities. Simply losing money is not enough; you must show the firm breached its fiduciary duty, was negligent, or engaged in fraud. Robo-advisors are held to the same standards as human investment advisers under the Investment Advisers Act of 1940. If your losses resulted from algorithm errors, inadequate disclosure, or unsuitable trades, you should consult with a securities attorney to evaluate whether you have a viable claim.
What is AI-washing and is it illegal?
AI-washing refers to making false or misleading claims about the use of artificial intelligence in investment strategies. It is illegal under federal securities laws and SEC regulations prohibiting fraud and material misrepresentations. In March 2024, the SEC brought its first enforcement actions against two investment advisers for AI-washing, imposing $400,000 in combined penalties. Firms that claim to use AI or machine learning in portfolio management must ensure these representations are accurate. Exaggerating AI capabilities, claiming nonexistent proprietary algorithms, or misleading investors about the role of automation in investment decisions can all constitute AI-washing violations subject to enforcement and civil liability.
How do I prove an AI trading system was negligent?
Proving AI negligence requires establishing the applicable standard of care, showing the algorithm or firm’s supervision failed to meet that standard, and demonstrating your losses resulted from these failures. This typically requires expert testimony from financial professionals or computer scientists who can analyze the AI system and explain how it deviated from industry standards. Evidence includes account statements showing unsuitable trades, communications with the firm about the AI system, algorithm audit trails or system logs if available, and regulatory guidance establishing best practices for AI in finance. You must also show causation by demonstrating your losses would not have occurred but for the algorithmic failures or inadequate supervision.
Who is responsible when an investment algorithm fails?
Liability for algorithmic failures may extend to multiple parties depending on the circumstances. The financial institution offering the AI service bears primary responsibility for ensuring the system is suitable and properly supervised. The software developer may be liable if the algorithm contains defects or operates contrary to representations made about its capabilities. Individual brokers or advisers who recommend AI platforms without adequate due diligence can face personal liability. Platform operators running unregistered investment services may violate federal and state securities laws. In practice, responsibility often flows up to the registered broker-dealer or investment adviser because these entities have regulatory obligations they cannot outsource to algorithms.
What damages can I recover in an AI trading fraud case?
Recoverable damages in AI trading fraud cases typically include out-of-pocket losses, which measure the difference between what you invested and your current account value. You may also recover lost profits if you can demonstrate what gains you would have achieved with proper advice or suitable investments. Interest on your losses may be available depending on the legal claims and jurisdiction. In some cases, attorney fees and costs can be recovered under securities laws that provide fee-shifting for successful plaintiffs. Punitive damages may be available under state law for willful fraud or egregious misconduct, though these are not recoverable in FINRA arbitration. The specific damages available depend on your legal claims, the forum where your case proceeds, and the evidence supporting your losses.
Is there a time limit for filing an AI trading fraud claim?
Yes, securities fraud claims are subject to strict statutes of limitations that vary depending on the legal theory and jurisdiction. Federal securities fraud claims under Section 10(b) and Rule 10b-5 must be brought within five years of the violation or two years after you discovered or should have discovered the fraud, whichever is earlier. California securities fraud claims under Corporations Code Section 25400 have a four-year statute of limitations. FINRA arbitration claims must generally be brought within six years of the occurrence or event giving rise to the claim. Some claims may have shorter time limits. It is critical to consult with an attorney promptly after discovering potential fraud, as waiting too long may permanently bar your claims regardless of their merit.
Do I have to go to court or can my case be resolved through arbitration?
Most brokerage and investment advisory agreements contain mandatory arbitration clauses that require disputes to be resolved through FINRA arbitration rather than court litigation. FINRA arbitration is a private dispute resolution process overseen by the Financial Industry Regulatory Authority. It typically moves faster than court cases and uses arbitrators with securities industry expertise. If your agreement contains an arbitration clause, you will likely be required to pursue your claims through FINRA unless the clause is unenforceable for some reason. Some cases involving unregistered platforms or state law claims may proceed in state or federal court. An attorney can review your agreements and advise you on the appropriate forum for your specific case.
What should I do if I suspect AI trading fraud?
If you believe you have been the victim of AI trading fraud, take several immediate steps to protect your rights. First, stop making additional investments with the firm or platform if you have concerns about its legitimacy. Preserve all documentation including account statements, marketing materials, communications with the firm, and any contracts or advisory agreements. Do not delete emails or text messages even if they seem unimportant. Take screenshots of the firm’s website and any AI-related claims before they can be changed or removed. Consider filing a complaint with the SEC, FINRA, or your state securities regulator to create an official record. Most importantly, consult with a securities attorney promptly to evaluate your legal options before statutes of limitations expire. Many attorneys offer free initial consultations to discuss potential AI trading fraud cases.
Take Action Against AI Trading Fraud
Artificial intelligence has created unprecedented opportunities for investment fraud, and regulators are still catching up to the threat. If you have lost money due to AI-washing, robo-advisor negligence, or algorithmic trading misconduct, you do not have to accept these losses as the cost of technological progress.
The law holds financial firms accountable for the AI systems they deploy. Robo-advisors must meet the same fiduciary standards as human advisers. Firms cannot hide behind algorithmic complexity to excuse fraud or negligence. The SEC’s 2024 enforcement actions have established that AI-washing violates federal securities laws.
But time limits restrict your ability to pursue these claims. Securities fraud statutes of limitations do not wait while you decide whether to take action. Evidence can disappear, firms can change their practices to cover their tracks, and delay can permanently bar your right to recovery.
Schedule Your Free Consultation
If you have suffered investment losses involving AI trading systems, robo-advisors, or algorithmic trading, contact our firm for a free consultation. We will review your situation, explain your legal options, and help you understand whether you have viable claims. Our contingency fee structure means you pay no upfront attorney fees.
With 10 years of experience defending broker-dealers, we understand how AI trading platforms operate and how they fail. Let us put that insider knowledge to work for you.
