Regulators from Montana, Texas, and Alabama have filed enforcement actions against YieldTrust.ai, a cryptocurrency trading platform, for allegedly operating a Ponzi scheme. YieldTrust.ai claimed that its dApp called “YieldBot” was powered by cutting-edge AI and could generate returns of up to 2.2% per day, but the regulators alleged that YieldTrust.ai failed to provide proof that the AI-powered bot existed.
Independent Audit of YieldBot’s Smart Contract Found It “Dangerous”
The regulators claimed that an independent firm audit of YieldBot’s smart contract found it to be “dangerous” because the deploying team retained sufficient control to block users from withdrawing their assets. YieldTrust.ai allegedly announced that it would cease operations after the audit of its smart contract was published, but the regulators’ orders accuse YieldTrust.ai of raising capital from the public to cover withdrawals from prior investors.
Regulators Seek Fines and Cease and Desist Orders
Montana’s regulator has issued a cease and desist order and is seeking $100,000 in fines, while the Texas State Securities Board has issued multiple cease and desist orders. The hype surrounding AI has reportedly led scammers to develop high-tech ploys to deceive investors, according to Montana’s securities commissioner.
AI Accessibility and Hype Surrounding ChatGPT
AI is becoming more accessible and surrounded by hype, with the release of the ChatGPT AI chatbot by OpenAI. Despite its inaccuracies at times, ChatGPT has proved to be a powerful tool, with the latest version capable of acing the bar, SATs, and even identifying exploits in smart contracts.
YieldTrust.ai Accused of Perpetrating a Ponzi Scheme
Regulators from Montana, Texas, and Alabama have accused YieldTrust.ai of perpetrating a Ponzi scheme and demanded it stops all activity. YieldTrust.ai claimed its dApp called “YieldBot” was powered by cutting-edge AI, but regulators allege that the bot did not exist and that YieldTrust.ai was raising capital from the public to cover withdrawals from prior investors, which is the hallmark of a Ponzi scheme. The website and Twitter account of YieldTrust.ai have been taken down.
