State sues radiologist claiming he ran ‘Ponzi-like’ AI scheme to bilk $5M from physicians and family
The state of Colorado is suing a local radiologist and his bankrupt company claiming they bilked investors of $5.2 million through a Ponzi-like scheme.
Securities Commissioner Tung Chan officially filed the complaint against Michael Cole, MD, and Sage Income LLC on Wednesday. He alleges the company raised millions from investors, claiming it would use an artificial intelligence algorithm to trade securities.
Sage Income had promised investors it could notch returns of between 9% and 15%, trading in a fund that the physician controlled. Cole allegedly said he would use a proprietary algorithm to generate “higher than market returns from investors,” according to the complaint.
However, authorities claim these promises were “flagrantly dishonest,” with Sage logging negative rates of return between 2019 and 2024.
“Cole later admitted to investigators that the funds had instead been used to develop and train the software via trial and error,” authorities allege. “Bank records also revealed that investor funds were used to pay interest to earlier note holders in a Ponzi-like scheme.”
The Lakewood, Colorado-based radiologist allegedly never paid investors their promised returns. Those involved logged “substantial losses,” ranging from $35,000 to over $2 million. Cole allegedly never disclosed any risks related to transferring the proceeds to pay off earlier investors, nor that he was using others’ money to float loans and personal expenses.
Law360’s Katryna Perera first reported news of the lawsuit late Wednesday. The outlet could not immediately reach the defendant for comment, while Commissioner Chan issued a brief statement.
“We have seen a lot of the same old scams that mask themselves behind the excitement of new technology like AI,” he told Law360. “We recommend that investors slow down and research before investing and remember that if it's too good to be true, it usually is."
More on the allegations
The radiologist first founded Cole Capital—the predecessor to Sage—in 2016. He had described the firm as a hedge fund, with the purpose of developing AI investment technology capable of “rapidly adapting its trading strategy in response to current market conditions.” Cole had operated and controlled the firm alongside his mother (who invested $978,900), brother ($16,581) and another individual ($320,000), according to the complaint.
He later dissolved the firm in 2019, crediting the three partners with a debt interest totaling $1.3 million. However, in reality, there were no deposits into any Sage bank account from any of the three partners. Two months later, Cole allegedly launched Sage and began courting new investors. He claimed that the algorithm could help detect moves from large institutional investors, buying the same shares before the price was driven up.
“Investors uniformly report that Cole told them, and they believed, that their invested funds would be used to trade in Sage, and the algorithm would be applied to generate high returns on their investment ‘no matter how the market is performing,’” the complaint claims.
By 2022, Sage began issuing quarterly reports to investors, containing “misrepresentations and material omissions designed to encourage additional investment.” One January 2023 update had claimed Sage was outperforming the S&P 500 by 29.4%, with the firm transacting more than $500 million in U.S. equities during its first year. These reports continued through October 2024.
However, internal records showed Sage’s trading activity was “consistently losing money,” authorities charge. Between late 2019 and mid-2020, Cole purportedly deposited up to $1.2 million in investor contributions, but by the time the accounted closed in July 2020, only $1,000 remained.
“Cole’s trading decisions had squandered these investor funds, and he never disclosed this tremendous loss to future Sage investors,” the complaint claims.
Personal notes showed that the company’s cash flow was “extremely tight.” Investors were allegedly only paid interest when Sage had an influx of cash from other individuals. For example, in January 2021, it used a portion of a $250,000 investment from one customer to pay over $347,000 to another existing investor. In another instance, Cole allegedly transferred $190,000 from Sage into his own personal bank account.
By November 2024, the radiologist’s personal notes indicated he had discovered an error impacting Sage’s trading algorithm. This resulted in the company taking significant losses at about 95% of its accounts. Cole shut down the algorithm at the time, alerted investors of technical issues, and dissolved the company. Sage ultimately filed for bankruptcy in February 2025.
The complaint also offers further details about the 14 investors bilked by Sage, including five radiologists. One doc, based in Denver at the time, had supervised Cole when he was a medical resident and invested some $625,000, receiving back about $496,000. Another radiologist—also based in Colorado at the time and now married to the first—invested another $250,000 in 2021, only getting back about $86,000. A third Arizona radiologist and his own LLC invested $2.085 million over multiple years and later sued Cole in 2025 after receiving zero returns on his investments. A fourth radiologist acquaintance in Utah invested $35,000 in 2020 but saw no returns, according to the complaint. And a fifth—who had worked at the same Denver hospital as Cole and now resides in New Mexico—invested $300,000 in 2023 but only got back about $81,000.
Authorities are seeking an injunction against Cole to stop him from taking part in investing, restitution at an amount to be determined at trial, and further relief “as the court deems proper.” Cole is not a licensed investment advisor and Sage never registered as a broker dealer, a fact that was never disclosed to contributors, according to the complaint.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.