Artificial intelligence is hot right now, and crypto scams haven't slowed a bit. And allegedly, some scammers are mashing them up to deceive and swindle would-be investors, including creating a fake AI-generated CEO to try and dupe people.
This week, the California Department of Financial Protection and Innovation (DFPI) announced its latest efforts to protect residents from crypto scams, sending cease and desist letters to five companies it claims attempted to profit from the AI hype train.
The agency’s latest targets are Maxpread Technologies, Harvest Keeper, Visque Capital, Coinbot, and QuantFund—who the DFPI accused of each offering unqualified securities and making false promises to investors. The DFPI accused the companies of making exaggerated claims about generating high returns using AI for crypto trading, and layered in multi-level marketing tactics to lure in unsuspecting victims.
— CA Department of Financial Protection & Innovation (@CaliforniaDFPI) April 19, 2023
In addition to trying to scam investors out of money, Maxpread Technologies is alleged to have “attempted to trick investors about the identity of the CEO using a fake, AI-generated avatar programmed to recite a script.”
In a YouTube video posted to its official Maxpread account on April 8, a claimed CEO named “Michael Vanes” gives an address about the company’s launch. But the agency claims that it’s not a real person; Maxpread’s real CEO is actually Jan Gregory, who the company had called its chief marketing officer and corporate brand manager.
A screenshot showing Maxpread's alleged fake, AI-generated CEO. Image: California DFPI
Another company, Harvest Keeper, allegedly hired an actor to play its CEO—no AI-generated leaders in sight in that case, although the firm did claim to use AI to maximize crypto trading returns.
“Scammers are taking advantage of the recent buzz around artificial intelligence to entice investors into bogus schemes,” DFPI Commissioner Clothilde Hewlett said in a statement. “We will continue our efforts to protect California consumers and investors by going after these unscrupulous actors.”
Labeling them Ponzi schemes, the California regulator said that investors were told that if they invested funds, the companies would use their knowledge, skill, experience, and AI assistance to trade crypto assets and generate incredible profits for investors.
It’s not just fake, AI-generated music collaborations generating headlines this week: now it’s a fake, AI-generated interview with a legendary sports icon. And it has the family of seven-time Formula 1 (F1) racing champion Michael Schumacher seeing red.
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“In each case, these claims are false,” the DFPI wrote, saying the companies promised between 0.6% and 4.81% daily returns on investments.
The cease and desist letters are the latest in California regulators’ actions to stamp out crypto crime in the state. Following the collapse of FTX, the DFPI joined other state regulators in opening an investigation into the cryptocurrency exchange and its founder, Sam Bankman-Fried. In December, the DFPI ordered MyConstant to cease offering select crypto products, as the DFPI prohibited the sale of securities, including its primary lending platform and interest-bearing accounts.
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Arthur Hayes says the speed at which projects like Terra grow and implode is a feature of the crypto industry, not a bug. He founded crypto exchange Bitmex in 2014 and then became the original crypto bad boy. In 2021 the DOJ charged him in with violating the U.S. Bank Secrecy Act for not implementing an anti-money laundering program at Bitmex. He plead guilty and was sentenced to two years probation and six months of home detention. In fact, he was still sporting an ankle bracelet on a recent cover of New York Magazine. Now he's living in Singapore, offering up his views on the crypto industry with long form, meme-filled essays, and still thinks the crypto industry will save investors from what he calls a broken banking system. "I don't care if you're capitalist or you're a communist. Everybody put on a lot of debt. We've passed the point where that debt is becoming useful," he said. "And therefore everyone is going to take an L unless they get some crypto or some gold—some hard asset that's outside of the traditional banking system."
“The entities named have been ordered to stop operating in California because they have violated securities law,” a DFPI spokesperson told Decrypt. “This means no selling or even offering ‘investments’ like these to California residents.”
Although it was targeted by the California agency, the Maxpread Technologies website claims that it and its affiliates do not target customers or operate in the United States. Maxpread, Harvest Keeper, Visque Capital, Coinbot, and QuantFund did not immediately respond to Decrypt’s requests for comment.
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