Securities regulators in Montana, Texas, and Alabama have jointly filed enforcement actions against cryptocurrency trading platform YieldTrust.ai, alleging that it is "perpetrating a Ponzi scheme."
According to declarations of April 4 of the Montanano, jean and alabamanian Regulators, YieldTrust.ai and its Romanian owner, Stefan Ciopraga, claimed that the decentralized application (DApp) called "YieldBot" is "powered by cutting-edge artificial intelligence" and is "capable of executing 70 times more trades with 25 times higher profits than any human merchant could do it.
The regulators alleged that YieldTrust provided โno proofโ to investors that the artificial intelligence (AI)-powered bot exists, โmuch less that it is performing at the level that YieldTrust.ai claims.โ
The Montana regulator stated in its cease and desist order that YieldBot was developed for Binance's BNB Smart Chain and could interface with staking programs to generate returns for new investors of up to 2.2% per day via:
โ[Analyzing] crypto markets and, within milliseconds, make their own trading decisions, autonomously choosing from hundreds of trading methods and chaining them together to create unique strategies, achieving exhilarating performance.โ
However, state regulators claimed that an independent firm that conducted an audit of YieldBot's smart contract found it to be "dangerous" as "the implementation team maintained sufficient control to prevent users from withdrawing their assets."
As noted in the regulator's statements and highlighted in an April 4 tweet from Montana Securities Commissioner Troy Downing, scammers are apparently capitalizing on the hype surrounding AI "by developing high-tech tactics to deceive the investors".
Artificial intelligence may be an exciting concept, but scammers try to cash in on the excitement by developing high-tech tactics to fool investors.#AI #Security Fraud #InvestmentScam #MTNews https://t.co/FMSqLJW40E
โ Commissioner Troy Downing (@DowningCSIMT) April 4, 2023
An order from the Montana regulator requires YieldTrust.ai to cease and desist from all activity in the state and seeks a total of $100,000 in penalties, while the Texas State Securities Board issued multiple cease and desist orders.
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After the audit of its smart contract was published, YieldTrust.ai reportedly announced that it would cease operations, which appears to be verified by a lack of trading activity based on data from DappRadar.
However, the regulator's orders accuse YieldTrust.ai of "raising capital from the public to cover previous investor withdrawals," which, along with the promise of high returns, are the characteristics of a ponzi scheme.
YieldTrust.ai de website has been disconnected and his Twitter account removed Cointelegraph was unable to contact YieldTrust.ai or Ciopraga for comment.
AI has become much more prominent, accessible, and surrounded by hype since the release of ChatGPT's AI chatbot on November 30 by AI research company OpenAI.
Despite its inaccuracy at times, ChatGPT has proven to be a powerful tool, with the latest version able to pass the bar, beat SATs, and even identify exploits in smart contracts.
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