Crypto Fraud In Texas
In the world of cryptocurrency, fraud, and scams are rampant, and the state of Texas is no exception. On Wednesday, the Texas State Securities Board demanded the termination of an “artificial intelligence investment scam” that promotes TruthGPT Coin using fake animated avatars and images of Tesla and Twitter CEO Elon Musk to dupe would-be investors. The emergency ceases and desist order was filed against Horatiu Charlie Caragaceanu, The Shark of Wall Street, and Hedge4.ai.
The TruthGPT Coin and Elon Musk AI Token were launched in March as a new digital asset investment campaign, Texas regulators said. The tokens are being marketed online through avatars portraying Elon Musk endorsing TruthGPT Coin and comparing it to ChatGPT, with the claim that purchasers can earn up to 1,000 times their investment.
This is a fraudulent securities scheme, according to the order. “We didn’t allege a Ponzi scheme but rather a fraud through concealment of information and misleading statements,” said Joseph Rotunda, the director of enforcement at the Texas State Securities Board. “We were concerned that waiting, given the hype around AI and the use of Elon Musk’s persona, would do more harm than good.”
The order called the tokens part of a fraudulent securities scheme. “In this case, we didn’t allege a Ponzi scheme but rather a fraud through concealment of information and misleading statements,” Rotunda said. “We chose this approach because a thorough source and use analysis of assets in Ponzi cases takes time. We were concerned that waiting, given the hype around AI and the use of Elon Musk’s persona, would do more harm than good.”
The TruthGPT Coin site also included images of Binance CEO Changpeng “CZ” Zhao and Ethereum co-founder Vitalik Buterin, regulators said, in an apparent attempt to lend the scheme legitimacy.
The state of Texas is not alone in sounding the alarm over scammers capitalizing on the massive popularity of AI tools. In April, California regulators with the California Department of Financial Protection and Innovation (DFPI) issued cease and desist letters to five companies that it claimed had wrapped scams in a veneer of A.I. Since the launch of OpenAI’s ChatGPT, scammers have increasingly tried to capitalize on the AI craze and trick investors out of their money and cryptocurrency.
Other state regulators joining Texas include the Alabama Securities Commission, the Montana State Auditor, the Kentucky Department of Financial Institutions, and the New Jersey Securities Bureau.
The Securities Commissioner Travis J. Iles issued the emergency cease and desist order to “protect the public from immediate and irreparable harm.” “Bad actors continue their attempts to capitalize on this widespread public interest,” he said. “They’re devising schemes that create the appearance they have developed sophisticated artificial intelligence platforms – but instead of being rooted in artificial intelligence, the offerings too often are nothing more than frauds.”
While Elon Musk has talked about creating a TruthGPT A.I. tool, it does not involve a token and is not connected in any way to the TruthGPT Coin cited in the order. It is worth noting that TruthGPT Coin is being marketed as an “AI-powered cryptocurrency investment advisor, powered by Elon Musk AI.” But this is entirely false, and the use of Elon Musk’s image is misleading and could be seen as a form of impersonation.
The emergency cease and desist order comes as a warning to all investors and crypto enthusiasts to be vigilant and exercise caution before investing in any cryptocurrency. It’s essential to research a project thoroughly, and investigate its whitepaper, its team, and its roadmap before investing in it. Moreover, it’s essential to verify the authenticity of any endorsements or affiliations purported by a project.
The Texas State regulators’ emergency ceases and desist order against Horatiu Charlie Caragaceanu, The Shark of Wall Street, and Hedge4.ai highlights the rampant rise of AI investment scams in the cryptocurrency market. The Lone Star State joins others in sounding the alarm over scammers capitalizing on the massive popularity of AI tools.
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