US state regulators believe that YieldTrust.ai, a cryptocurrency trading platform, operated a Ponzi scheme by making exaggerated claims about an AI-powered bot that was allegedly capable of providing investors with significant returns.
- Regulators from Montana, Texas, and Alabama have accused YieldTrust.ai, a cryptocurrency trading platform, of operating a Ponzi scam.
- According to reports, YieldTrust.ai has stopped operating, and both its website and Twitter account have been erased.
- Authorities issue a warning that con artists are using the buzz surrounding AI by creating cutting-edge schemes to defraud investors.
Background
Several US state regulators have accused YieldTrust.ai, a cryptocurrency trading platform that advertised the use of cutting-edge artificial intelligence (AI) to produce returns of up to 2.2% each day, of being a Ponzi scam. The decentralized application (DApp) known as “YieldBot” was allegedly not supported by any evidence that the AI-powered bot exists, let alone that it functions as advertised, according to the enforcement actions that the regulators from Montana, Texas, and Alabama filed against YieldTrust.ai.
The Allegations
The state inspectors said that YieldTrust.ai and its Romanian owner Stefan Ciopraga were “perpetrating a Ponzi scheme,” one of the features of a Ponzi scheme. They allegedly raised money from the general public to cover withdrawals from previous investors. Additionally, they stated that YieldBot’s smart contract was “hazardous” according to an independent company’s examination because the deploying team had enough authority to prevent consumers from withdrawing their money.
Developed for Binance’s BNB Smart Chain, YieldBot, according to Montana’s regulator, could connect with staking programs to create returns for new investors of up to 2.2% per day by studying the cryptocurrency markets and independently making its own trading decisions. According to claims, YieldBot can execute 70 times as many trades with 25 times the profits as a human trader. The state officials, however, asserted that there was no evidence to support these assertions.
The Consequences
YieldTrust.ai was ordered to stop all business operations in Montana by the state’s regulator, who also sought a $100,000 punishment against the company. The Texas State Securities Board also issued numerous cease and desist orders against YieldTrust.ai. According to reports, YieldTrust.ai declared that the company would shut down when the audit of its smart contract was made public. However, the state regulators asserted that YieldTrust.ai was operating like a Ponzi scheme by soliciting funding from the general public to pay for withdrawals from earlier investors. The website for YieldTrust.ai has been shut down, and its Twitter account has been erased.
The Hype Surrounding AI
According to statements made by the regulator and emphasized in a tweet by Troy Downing, Montana’s securities commissioner, on April 4, scammers are taking advantage of the unrest around AI. Yet, the November 30, 2021, launch of the ChatGPT AI chatbot by AI research firm OpenAI has demonstrated that AI may be a potent tool despite its occasional inaccuracy. The most recent iteration of ChatGPT can pass the bar, ace SATs, and even spot vulnerabilities in smart contracts.
Conclusion
The accusations against YieldTrust.ai warn about how con artists can take advantage of the buzz around AI to trick investors. Investors should have been alarmed by the absence of evidence supporting YieldBot’s claims and the apparent retention of control by the deploying team to prevent consumers from withdrawing their cash. Investors should be reminded to perform due diligence before investing in any scheme that makes exaggerated claims in light of the state regulators’ prompt response. AI has the potential to be an effective tool, but investors need to exercise caution and avoid falling into high-tech gimmicks that guarantee inflated profits.
