A Lakewood man fraudulently took more than $5 million from investors and failed to pay them the promised returns in a “Ponzi-like” artificial intelligence investment scheme, Colorado alleges in a new lawsuit.
Michael Cole violated state law when he convinced 14 investors, many of them family members or former colleagues, to invest a total of $5.2 million through promissory notes in his company Sage Income LLC, which he said used an AI algorithm to trade securities, according to a lawsuit filed Wednesday in Denver District Court.
Cole works as a radiologist and is not licensed to offer or sell securities in Colorado, state officials wrote in a Saturday news release.
A security is an investment, typically intangible, that often comes in the form of stocks, bonds or promissory notes, according to the Colorado Division of Securities. A promissory note is a written promise to repay a certain amount of money, either on a schedule or upon demand.
Cole told investors their money would be used to trade stock in a fund he controlled, and that the AI software allowed him to buy shares in a way that generated higher-than-average market returns, the complaint alleges. For more than four years, he told investors the AI software had been extensively tested, and the company was in good financial standing.
But those statements were “flagrantly dishonest,” state attorneys wrote in the complaint.
When Cole created Sage Income LLC in September 2019, he owed three former business partners, including two of his family members, $1.3 million after dissolving a previous company the four ran, Cole Capital LLC, the complaint alleges. From there, the financial picture got worse. Bank records show Sage Income “consistently” lost money each month from November 2019 to December 2024, the complaint alleges
Investment payments made to investors were “funded not by trading gains but by cash injected into Sage either by Cole or by new investors in a Ponzi-like scheme,” state attorneys wrote in the complaint.
Bank records also showed Cole transferred some money into his personal account and used the funds to pay off an unrelated loan, the complaint alleges. Cole told state investigators he used the investors’ funds to develop and train the AI software.
By the time Sage Income filed for bankruptcy in February 2025, each investor had lost money, for a total of more than $3.9 million lost, according to the complaint.
“We believe that Mr. Cole used the promise of AI investing to defraud Coloradans, including his own brother, parents and colleagues,” Colorado Securities Commissioner Tung Chan said in a statement. “We have seen a lot of the same old scams that mask themselves behind the excitement of new technology like AI. We recommend that investors slow down and research before investing and remember that if it’s too good to be true, it usually is.”
Cole could not be reached for comment Saturday.
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