California financial regulator, the Department of Financial Protection and Innovation, has issued desist and refrain orders against five entities claiming to use artificial intelligence (AI) to trade cryptocurrencies, alleging they were actually “fraudulent investment schemes”.
The regulator accused two of the firms of using actors and AI to impersonate CEOs, with one entity, Maxpread Technologies, alleged to have used an AI-generated avatar called “Michael Vanes” to act as CEO and market its products, while Harvest Keeper was accused of hiring an actor to play the role of its CEO, Markus Peters. The DFPI noted the entities had gone to great lengths to appear as if they were legitimate businesses, creating professional websites, social media accounts and promotions from influencers.
Investors were promised incredible returns by entities purporting to use AI to trade cryptocurrencies, the regulator said. According to the DFPI, the entities were taking advantage of the hype surrounding AI to lure in investors by claiming to use the technology to trade crypto assets and reward investors with multi-level marketing schemes. However, the regulator claims the entities were “false” and eventually stopped processing withdrawals before going offline, leaving investors with no way to access their funds.
The schemes initially seemed to work well, with early withdrawals processed and account balances steadily increasing. However, eventually, withdrawals would not be processed, and the website would go offline, leaving investors in the dark. The regulator warned investors to be cautious about such investment products, saying they raise hype with the promise of high returns before going dark.
The websites for Harvest Keeper and Coinbot are currently unavailable, while the websites of the other three entities are still accessible. Visque Capital advertises various investment plans on its website, including a high-end option that pledges a daily return of 3%. For an investment of $50,000, this plan guarantees a profit of approximately $270,000 after a 180-day period.
The growing trend of using AI to trade cryptocurrencies has become a hot topic, with many investors turning to such products in the hopes of generating significant returns. However, the recent allegations of fraudulent schemes could damage investor confidence in such products and lead to increased scrutiny from regulators.