CFTC Issues Advisory on AI Scams in Fintech Investments
The Commodity Futures Trading Commission (CFTC) has recently issued a stern warning to the public, cautioning against the proliferation of Artificial Intelligence (AI) scams in the realm of fintech investments. In a customer advisory titled “AI Won’t Turn Trading Bots into Money Machines,” the CFTC sheds light on the deceptive tactics employed by fraudsters exploiting the allure of AI technology to entice investors with false promises of significant returns.
The advisory, issued by the CFTC’s Office of Customer Education and Outreach (OCEO), aims to educate investors about the risks associated with AI-driven scams. With the increasing integration of AI into various aspects of everyday life, scammers are capitalizing on the technology’s potential. Claims of substantial returns through trading bots, trade signal algorithms, and crypto-asset arbitrage algorithms have become prevalent.
One key aspect highlighted in the advisory is the prevalence of false claims propagated through social media platforms and influencers. The CFTC warns investors to be cautious of promises of high or guaranteed returns, considering them as red flags indicative of potential fraud. Melanie Devoe, Director of OCEO, emphasizes the need for investors to exercise skepticism and discernment in the face of such claims.
The advisory points out that scammers often exploit the lack of regulatory clarity surrounding AI in financial markets. False promises of AI-created algorithms generating extraordinary returns, sometimes reaching tens of thousands of percent or boasting 100 percent “win” rates, are debunked by the CFTC. The advisory underscores that AI technology cannot predict the future or sudden market changes, debunking the fraudulent notion that it can serve as an infallible money-making machine.
The CFTC provides real-world examples of the consequences of falling victim to AI scams. In one case, the CFTC alleges that several defendants defrauded customers by marketing commodity pools, digital assets, or “investment programs” promising above-average returns through the use of AI. Instead, investors suffered substantial losses, with one case involving nearly 30,000 bitcoins worth approximately $1.7 billion at the time.
To empower investors in safeguarding their financial interests, the CFTC advisory offers practical guidance. Investors are encouraged to conduct thorough research on the background of companies or traders before entrusting funds to trading bots or signal providers. This includes performing a reverse image search on key personnel to verify their identities.
Additionally, the advisory suggests researching the history of trading websites by checking the age of domain registration and seeking a second opinion from financial advisors, trusted friends, or family members. Investors are also reminded to consider the risks associated with underlying assets, along with the impact of fees, spreads, and subscription costs on potential returns.
As fintech continues to evolve, the CFTC’s advisory serves as a crucial reminder of the importance of financial literacy and due diligence in navigating the complexities of AI-driven investment opportunities. Investors are urged to exercise caution, particularly in the age of social media, where false information can spread rapidly. By staying informed and adopting a vigilant approach, investors can better protect themselves against the risks associated with AI scams in the fintech landscape.
