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The California Department of Financial Protection and Innovation (DFPI) has issued cease and desist orders against five firms capitalizing on the excitement surrounding AI in an effort to mislead unsuspecting investors.
All Hype, Little Info
The regulator states that all five companies are in violation of securities laws by offering unregistered securities to the public.
Additionally, these firms are accused of misleading their clients through omissions, misrepresentations, or even allegedly fabricating their financial models.
As expected, all five companies promoted high-yield investments, frequently guaranteeing minimum returns on a daily basis. This is a significant warning sign, as guaranteed investment returns are nearly impossible to secure; moreover, the promised minimum returns were greater than what could realistically be expected, even from established blue-chip investments.
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The twist? Representatives from these companies claim that the anticipated results could be achieved with the assistance of AI.
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Cease and Desist Orders Issued
DFPI Commissioner Clothilde Hewitt noted that the targeted companies are leveraging the current excitement surrounding AI LLMs to lure investors into making potentially serious mistakes.
“Today’s enforcement actions continue the DFPI’s crackdown on investor fraud. Scammers are exploiting the recent buzz around artificial intelligence to draw investors into fraudulent schemes. We will persist in our efforts to safeguard California consumers and investors by pursuing these unscrupulous individuals.”
The most audacious company singled out by the DFPI is Maxpread Technologies, which guaranteed a minimum ROI of 0.6% per day. In reality, the firm seems to function like a typical Ponzi scheme. It is also suspected of utilizing an AI-generated image of a fictitious CEO, although this has not been verified.
Following are Harvest Keeper, Visque Capital, and QuantFund, all of which promised guaranteed APRs ranging from 1% to 4.81%. These companies attributed their ability to provide such guarantees to AI, unlike other firms that offered high-risk potential APRs.
The final company targeted by regulators is Coinbot, which is essentially another crypto-trading bot—this time, enhanced by AI. Coinbot guaranteed investors a minimum daily ROI of 1.5%, supposedly generated from trades executed by the bot. In truth, the company merely paid earlier investors with the funds collected from newer investors.
The current excitement surrounding AI has attracted significant interest from venture capitalists, established blue-chip companies, and retail investors alike. Until the enthusiasm subsides, it is likely that we will witness numerous additional attempts to profit from this trend, reminiscent of the shitcoin surge in 2017.
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