Regulators from multiple US states have jointly filed enforcement actions against YieldTrust.ai, a cryptocurrency trading platform, alleging that it is “perpetrating a Ponzi scheme”. YieldTrust.ai, along with its Romanian owner, Stefan Ciopraga, is accused of making false claims that the decentralized application (DApp) called “YieldBot” is “powered by cutting-edge artificial intelligence” and can execute 70 times more trades with 25 times higher profits than any human trader could. YieldTrust.ai allegedly failed to provide any proof to investors that the AI-powered bot exists, let alone that it performs at the level YieldTrust.ai claims.
According to a statement released on April 4 by the regulators from Montana, Texas, and Alabama, 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 by analyzing the crypto markets and making trading decisions autonomously. However, an independent firm that conducted an audit of YieldBot’s smart contract found it to be “dangerous”, as “the deploying team retained sufficient control to block users from withdrawing their assets”.
The orders from the regulators demand that YieldTrust.ai cease and desist all activity in Montana, Texas, and Alabama and seek a total of $100,000 in fines. The Texas State Securities Board issued multiple cease and desist orders. YieldTrust.ai allegedly announced it would cease operations after the audit of its smart contract was published, and there appears to be no trading activity on the platform, according to DappRadar data.
However, the regulator’s orders accuse YieldTrust.ai of “raising capital from the public to cover withdrawals from prior investors,” which, alongside the promise of high returns, are the characteristics of a Ponzi scheme. YieldTrust.ai’s website has been taken offline and its Twitter account deleted, and Cointelegraph was unable to contact YieldTrust.ai or Ciopraga for comment.
In an April 4 tweet from Montana’s securities commissioner, Troy Downing, it was noted that scammers are capitalizing on the hype surrounding AI “by developing high-tech ploys to deceive investors”. The use of AI has become more prominent and accessible since the release of the ChatGPT AI chatbot on November 30 by OpenAI, an AI research company. Despite its occasional inaccuracies, ChatGPT has proved to be a powerful tool, with the latest version capable of passing the bar, acing SATs, and even identifying exploits in smart contracts.
The allegations against YieldTrust.ai highlight the importance of investors exercising caution when investing in cryptocurrency trading platforms and the need for regulators to take action to combat fraudulent schemes in the crypto space.
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