State regulators crack down on fraudulent cryptos promoted as ‘Elon Musk AI Token’ and ‘TruthGPT Coin’
According to the cease and desist order, investors are being given the impression that Elon Musk endorses “TruthGPT Coin.”
The Texas State Securities Board joined several state regulators in issuing cease-and-desist orders against Horatiu Charlie Caragaceanu and his organizations, The Shark of Wall Street and Hedge4.ai, for promoting two cryptocurrencies named TruthGPT Coin and Elon Musk AI Token. The orders seek to clamp down on what they claim is a fraudulent securities scheme attempting to capitalize on the growing buzz around artificial intelligence (AI).
The TruthGPT Coin is being marketed as a cryptocurrency that utilizes an AI system called Elon Musk AI. The AI model can allegedly examine multiple digital assets, anticipate future cryptocurrency values and distinguish lucrative investments from fraudulent ones. The parties involved are also promoting TruthGPT Coin as a highly profitable venture, even stating it could increase in worth by a staggering 10,000 times.
The Emergency Cease and Desist Order states that investors are being falsely informed of Elon Musk’s endorsement of TruthGPT Coin, and animated avatars and images of Musk are being utilized to give the impression of his support. Promotional media also shows the alleged involvement of other public figures, including Changpeng “CZ” Zhao, the founder and CEO of Binance, and Vitalik Buterin, the co-founder of Ethereum.
Securities Commissioner Travis Iles cautioned, “Bad actors continue their attempts to capitalize on this widespread public interest.” He explained:
“They’re devising schemes that create the appearance that they have developed sophisticated artificial intelligence platforms — but instead of being rooted in artificial intelligence, the offerings too often are nothing more than frauds.”
Texas State Securities Board Enforcement Director Joe Rotunda advised investors to stay vigilant and “to set aside emotion and objectively evaluate every offering — especially when pitched by an unknown person through the internet.”
Related: How is artificial intelligence used in fraud detection?
The fraudulent scheme highlights the continuous need for caution and due diligence in the cryptocurrency industry. Using buzzwords like “artificial intelligence” can be enticing for investors, but it can also be used by bad actors to promote fraudulent activities like pump-and-dump schemes, which is common within the crypto industry.
According to data gathered by Chainalysis, “Of the 40,521 tokens launched in 2022 that gained sufficient traction to be worth analyzing, 9,902, or 24%, saw a price decline in the first week indicative of possible pump and dump activity.”
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