Earlier today, the Texas State Securities Board joined the Alabama Securities Commission and the Montana Securities Commission in filing enforcement actions to stop a fraudulent artificial intelligence investment scheme. The actions accuse YieldTrust.ai and Stefan Ciopraga of illegally soliciting investments tied to a decentralized application (dApp) that purportedly uses quantum artificial intelligence to trade digital assets. The initial scheme recently collapsed, and the respondents are now allegedly perpetrating a Ponzi scheme by raising capital from new investors to cover withdrawals from previous investors.
According to the orders, YieldTrust.ai is illegally marketing its dApp, known as the YieldBot, through an internet website, its social media channels and various online influencers. YieldTrust.ai is allegedly claiming the YieldBot is powered by cutting-edge artificial intelligence designed to interact with the market for digital assets. It is purportedly touting the sophistication of the artificial intelligence, claiming it is “capable of executing 70 times more trades with 25 times higher profits than any human trader could.” YieldTrust.ai is also allegedly claiming the artificial intelligence continuously evolves, as the YieldBot “continually improves itself… becoming more effective with each trade made.”
The YieldBot was purportedly developed for Binance’s BNB Smart Chain and YieldTrust.ai allegedly permits clients to stake Binance USD, USD Coin and Tether. According to the orders, YieldTrust.ai is claiming the YieldBot interfaces with the staking programs, and that it “picks up on the money deposited” and then “uses… funds on various centralized exchanges to generate profits with every withdrawal.” The promised profits are highly lucrative – YieldTrust.ai is allegedly claiming the YieldBot generated returns of 2.6% per day for four months and new investors can expect to earn up to returns of up to 2.2% per day.
Although artificial intelligence and investments tied to machine learning are generating widespread public interest, scammers are already leveraging the hype to perpetrate fraudulent securities schemes. Alabama, Montana and Texas filed today’s actions to proactively stop this type of fraud and protect the public from irreparable harm. The three state regulators are unanimous in strongly cautioning the public:
Artificial intelligence may be an exciting concept, but scammers are attempting to capitalize on the excitement by developing high-tech ploys to deceive investors – while playing on their emotions by falsely promising lucrative profitability and the once-in-a-lifetime opportunity to secure financial freedom. We are uncovering an increasing number of promotions for illegal and fraudulent investments tied to the artificial intelligence. Today’s action is likely just the tip of the iceberg.
According to the orders, an independent firm recently published an audit of the smart contract tied to the YieldBot. The audit showed the smart contract is dangerous and the deploying team retained sufficient control to block users from withdrawing their assets. After the publication of the smart contract audit, YieldTrust.ai allegedly announced it would cease operations. Instead, the orders accuse YieldTrust.ai of raising capital from the public to cover withdrawals from prior investors. Alabama, Montana and Texas filed today’s actions to stop this illegal and fraudulent scheme.
Texas Order: ENF-23-CDO-1869