A sophisticated investment fraud scheme that promised extraordinary returns through “proprietary algorithms” has unraveled, leaving over 200 investors nationwide grappling with millions in losses. The SEC’s recent enforcement action against Stock Purse Trading LLC, Liston Associates, Inc., and their founder Carole A. Liston reveals the calculated deception behind what prosecutors describe as a classic Ponzi scheme wrapped in modern technology claims.
The case represents one of the most significant investment fraud enforcement actions in Florida this year, with $5.7 million raised from unsuspecting investors over four years through false promises of monthly returns ranging from 5% to 20%. Filed in August 2025 in federal court, this case exposes how traditional Ponzi scheme tactics have evolved to exploit investor trust in algorithmic trading and artificial intelligence.
A scheme built on impossible promises
From August 2020 through July 2024, Carole A. Liston, a 61-year-old New York resident, orchestrated an elaborate fraud through her Florida-based companies. The scheme’s audacious promises included monthly returns of 5% to 20%, with some investors told they could double their money within 30 to 60 days. In the most extreme cases, Liston claimed her proprietary trading algorithm could deliver 350% annual returns through sophisticated short-selling strategies.
The fraud operated through three distinct investment programs – the Growth Fund, Income Fund, and Family Fund – each marketed as utilizing Liston’s supposed expertise in options trading and proprietary algorithms. Investors were provided access to fake online account summaries showing outstanding fictitious returns, creating an illusion of legitimate trading success that masked the underlying Ponzi structure.
One particularly egregious example uncovered by investigators showed an investor’s account balance allegedly growing from $395,000 to $981,000, while actual brokerage records revealed less than $2,000 in the account. This stark contrast illustrates the sophisticated deception employed to maintain investor confidence while systematically misappropriating their funds.
The anatomy of investor betrayal
The human cost of Liston’s scheme is staggering. More than 200 investors across the United States entrusted their life savings, retirement funds, and family wealth to what they believed was a legitimate trading operation. The scheme’s nationwide reach demonstrates how modern investment fraud transcends geographic boundaries, enabled by digital communications and the veneer of technological sophistication.
Of the $5.7 million raised from investors, at least $450,000 was diverted directly to Liston’s personal benefit, funding real estate purchases and luxury items. An additional $3.9 million was used for Ponzi-like distributions to earlier investors, maintaining the illusion of profitability while new investor funds subsidized these payments. Only a small fraction was actually invested in securities trading, which invariably produced significant losses rather than the promised gains.
The scheme’s victims had no control over their funds once transferred, placing complete trust in Liston’s claimed expertise. Many investors only discovered the true nature of their situation in summer 2023, when Liston finally disclosed her use of margin trading after failing to return principal investments as promised. This belated revelation came nearly three years into the fraud, highlighting how victims remained unaware of the risks they were unknowingly exposed to.
The mastermind behind the fraud
Carole A. Liston’s transformation from a New York resident to the architect of a multi-million-dollar fraud scheme reveals troubling gaps in investor protection and due diligence. Operating from Yonkers, New York, while managing Florida-incorporated companies, Liston exploited regulatory complexities and investor trust to build her fraudulent empire.
Liston established Stock Purse Trading LLC in March 2022, yet SEC investigators determined the fraudulent scheme began in August 2020 – a critical 18-month period during which she operated without proper business formation. This timeline discrepancy represents a significant red flag that should have alerted potential investors to the operation’s questionable legitimacy.
The corporate structure itself revealed warning signs. Stock Purse Trading LLC was administratively dissolved in September 2024 for failure to file required annual reports, demonstrating Liston’s disregard for basic corporate compliance obligations. Neither Liston nor her companies were registered with FINRA or any regulatory authority to provide investment advice, operating entirely outside the regulatory framework designed to protect investors.
Liston’s claimed expertise in options trading and proprietary algorithms proved entirely fabricated. Her representations of personal trading success and sophisticated investment strategies were marketing tools designed to attract investors rather than legitimate business capabilities. The disconnect between her claims and actual trading performance – which consistently produced losses – underscores the fundamental deception underlying the entire operation.
Legal violations and enforcement response
The SEC’s enforcement action charges all defendants with violating core securities laws designed to protect investors from fraud. The violations include Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, along with Rule 10b-5, which prohibit fraudulent conduct in securities transactions. Liston individually faces additional charges under Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, reflecting her role as an unregistered investment adviser.
The Miami Regional Office of the SEC, led by investigator Linda S. Schmidt and supervised by Sean M. O’Neill and Glenn Gordon, conducted the investigation. The litigation team, headed by Pascale Guerrier under the supervision of Teresa J. Verges, is seeking comprehensive relief including permanent injunctions, disgorgement with prejudgment interest on a joint-and-several basis, and civil penalties.
In August 2025, defendants agreed to a partial settlement without admitting or denying the allegations, consenting to permanent injunctions against future violations of federal securities laws. However, the monetary remedies – including disgorgement and civil penalties – remain to be determined by the court in future proceedings, leaving the full financial consequences uncertain.
A pattern of modern investment fraud
The Stock Purse Trading case fits within a troubling pattern of sophisticated investment fraud schemes that have proliferated in recent years. According to FTC data, Americans lost $5.7 billion to investment scams in 2024 alone, representing a 24% increase from the previous year and making investment fraud the leading category for consumer losses.
Recent comparable cases demonstrate the evolution of Ponzi scheme tactics. The Adam Brothers case involved $60 million raised through false claims about cryptocurrency “bot” trading algorithms, while the NovaTech scheme defrauded over 200,000 investors worldwide of $650 million through a crypto pyramid structure. These cases share common elements with the Liston scheme: promises of extraordinary returns, claims of proprietary technology, and systematic misappropriation of investor funds.
Legal experts note that modern Ponzi schemes increasingly incorporate technology-based legitimacy claims, exploiting investor fascination with artificial intelligence and algorithmic trading. This trend reflects fraudsters’ adaptation to contemporary investment interests while maintaining the fundamental structure of using new investor money to pay earlier participants.
Red flags investors should have recognized
The Liston scheme exhibited numerous warning signs that should have alerted prudent investors to potential fraud. The most significant red flag was the promise of consistent high returns with minimal risk – a mathematical impossibility in legitimate markets. Monthly returns of 5% to 20% would translate to annual returns of 60% to 240%, far exceeding the performance of even the most successful professional investors.
The claim of proprietary trading algorithms represents another classic warning sign, as legitimate algorithmic trading strategies are closely guarded trade secrets that would never be shared with retail investors. Fraudsters frequently invoke technological sophistication to explain their supposed competitive advantages while obscuring the lack of substance behind their claims.
The provision of fabricated account statements through online portals demonstrates how modern fraudsters exploit technology to create convincing illusions of legitimacy. The disconnect between promised account performance and actual trading results – evident in the example where $395,000 allegedly became $981,000 while actual brokerage records showed less than $2,000 – illustrates the sophisticated deception possible through digital manipulation.
Regulatory registration issues provided another clear warning sign. Neither Liston nor her companies were registered to provide investment advice, operating entirely outside the regulatory framework.
Legitimate investment advisers are required to register with the SEC or state regulators, file disclosure documents, and submit to regular examinations – safeguards that fraudulent operations consistently avoid.
The current state of justice and recovery
No criminal charges have been filed in connection with the Stock Purse Trading fraud, despite the significant scale of the alleged wrongdoing. The case remains exclusively within civil enforcement, limiting the potential consequences for the defendants to monetary penalties and business restrictions rather than imprisonment.
Both Stock Purse Trading LLC and Liston Associates, Inc. are now dissolved or inactive, effectively ending their business operations. However, no receivership has been established to recover assets for victim compensation, and no specific victim distribution plan has been announced. This absence of asset recovery efforts represents a significant concern for the hundreds of investors seeking to recover their losses.
The partial settlement agreement requires court approval and leaves critical questions unanswered. The amount of monetary remedies – including disgorgement, prejudgment interest, and civil penalties – remains to be determined in future court proceedings. This uncertainty prolongs the resolution process and delays any potential recovery for affected investors.
Carole A. Liston continues to reside in Yonkers, New York, with no evidence of criminal prosecution or asset seizure limiting her current activities. The permanent injunctions resulting from the civil settlement will prevent her from future involvement in securities offerings, but the deterrent effect remains limited without criminal consequences.
Regulatory implications and industry response
The Stock Purse Trading case contributes to evolving regulatory responses to technology-enabled investment fraud. The SEC’s enforcement statistics for fiscal year 2024 show $8.2 billion in financial remedies obtained, the highest in agency history, reflecting increased focus on combating investment fraud. This case exemplifies the agency’s emphasis on individual accountability alongside corporate enforcement.
Securities law experts note the increasing sophistication required to detect and prosecute modern investment fraud. The integration of machine learning and data analytics in fraud detection has achieved accuracy rates exceeding 85% in predicting enforcement outcomes, according to recent academic research. However, the continued success of schemes like Stock Purse Trading demonstrates that technological solutions alone cannot substitute for investor education and due diligence.
Enhanced compliance requirements for legitimate investment advisers reflect regulatory adaptation to evolving fraud tactics. These include strengthened know-your-customer protocols, enhanced internal controls mandates, and regular compliance auditing expansion designed to prevent legitimate businesses from being used as fraud vehicles.
Lessons for investors and the industry
The Stock Purse Trading fraud serves as a stark reminder that sophisticated marketing and technological claims cannot substitute for fundamental investment principles. Investors must maintain healthy skepticism toward any investment opportunity promising consistently high returns, particularly those involving proprietary strategies or algorithmic trading claims.
The case underscores the critical importance of verifying adviser registration and credentials through publicly available databases such as the SEC’s Investment Adviser Public Disclosure system. Legitimate investment professionals welcome investor inquiries about their registration status and regulatory history, while fraudsters consistently avoid such scrutiny.
For the financial services industry, this case highlights the ongoing challenge of protecting investors while fostering innovation. The legitimate development of algorithmic trading strategies and artificial intelligence applications in finance must be distinguished from fraudulent claims that exploit investor interest in technological advancement.
The ultimate resolution of victim recovery efforts will significantly impact public confidence in enforcement effectiveness. Without meaningful asset recovery and victim compensation, civil enforcement actions may prove insufficient deterrents to future fraud schemes. The financial services industry and regulatory community must continue evolving their protective measures to match the sophistication of modern investment fraud.
The Stock Purse Trading case represents more than a single enforcement action – it exemplifies the ongoing battle between fraudulent schemes that exploit investor trust and the regulatory systems designed to protect market integrity.
As this case proceeds through the courts, its resolution will provide important guidance for both investors seeking to protect their assets and regulators working to maintain market confidence through effective enforcement.
