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CFTC Reveals Alarming Rise in AI-Fueled Crypto Scams – Crypto News

Published

1 year ago

January 27, 2024

Dripp

The Commodity Futures Trading Commission’s Office of Customer Education and Outreach (OCEO) has raised an alarm over the growing number of Artificial Intelligence (AI) scams in the investment sector. The notice, titled “Customer Advisory: AI Won’t Turn Trading Bots into Money Machines,” aims to caution the public about fraudulent schemes that misuse AI technology to attract investors with promises of high returns.

The Allure and Risks of AI in Trading

The advisory points out the increasing integration of AI into everyday life and how scammers exploit this trend to make misleading claims about substantial returns through AI-powered trading bots, signal algorithms, and crypto-asset arbitrage algorithms.

These scams often gain traction on social media platforms, aided by influencers who unknowingly or deliberately spread misinformation. This has made it easier for fraudsters to target investors, particularly those not well-versed in the complexities of AI technology.

Melanie Devoe, Director of the OCEO, emphasizes the importance of skepticism and due diligence when dealing with AI-centric investment claims. The advisory aims to educate investors on the reality that AI, despite its advanced capabilities, cannot predict market movements with absolute certainty. It stresses the need for thorough research and background checks on companies and traders offering AI-based investment services.

CFTC Highlights Risks in AI-Powered Investments

The advisory further details how to identify and steer clear of potential scams. It underscores that investors should be cautious of platforms or individuals making exaggerated claims about AI-generated returns. Instead, they are advised to conduct extensive research, seek multiple opinions, and fully understand the risks involved. Special caution is advised regarding endorsements by social media influencers and offers from online strangers.

The advisory includes a case study of Cornelius Johannes Steynberg, who orchestrated a Ponzi scheme leveraging public interest in AI, leading to significant investor losses. This case is a stark reminder of the potential risks of AI-driven investment platforms.

The CFTC encourages customers and individuals to report suspicious activities or information, including potential violations of commodity trading laws, to their Division of Enforcement. This can be done through whistleblower tips or complaints on the CFTC’s website.