California DFPI Issues a Cease and Desist Order Against Crypto Firms with Fake Execs
- The California DFPI issued a cease-and-desist order against five crypto firms “to stop fraudulent investment schemes tied to artificial intelligence (AI).”
- The entities include Harvest Keeper, Visque Capital, Coinbot, and QuantFund, along with Maxpread Technologies and its CEO, Jan Gregory Cerato.
- Scammers are taking advantage of the recent buzz around artificial intelligence to entice investors into bogus schemes,” said the DFPI Commissioner.
- The companies used actors and AI to create fake executives for their companies and went to great lengths to ensure that their firms appeared legitimate.
Following the 2021 crypto market bull run, the number of crypto companies with sky-high valuations skyrocketed, but not every company was aimed at innovation, and investors found the same the hard way. Many companies had anonymous founders who had pseudonyms and could only be contacted via the social media platform Twitter. Interestingly, the California Department of Financial Protection and Innovation (DFPI) issued a cease and desist against five crypto firms “to stop fraudulent investment schemes tied to artificial intelligence (AI).”
According to the official announcement from the California regulator, many crypto firms made use of actors and artificial intelligence to create CEOs and other executives and commit crimes and financial fraud, duping investors out of their hard earned money.
“Today’s enforcement actions continue the DFPI’s crack down on investor fraud. Scammers are taking advantage of the recent buzz around artificial intelligence to entice investors into bogus schemes,” said DFPI Commissioner Clothilde Hewlett. “We will continue our efforts to protect California consumers and investors by going after these unscrupulous actors.”
The five crypto companies named in the cease and desist letter include Harvest Keeper, Visque Capital, Coinbot, and QuantFund, along with Maxpread Technologies and its CEO, Jan Gregory Cerato.
The California regulator said that Maxpread Technologies offered unqualified securities and “made misrepresentations and omissions to prospective investors.” The firm used AI to fake its CEO’s existence and promised daily investor returns of at least 0.6% but was actually running a Ponzi scheme, paying former inventors with the money of the latter.
Harvest Keeper and Visque Capital both promised investors returns of 4.81% and 2%, respectively, and offered unqualified securities. Visque Capital had “falsely represented that it was owned and operated by another company that had no affiliation with the entity.” Additionally, Coinbot ran a similar Ponzi scheme as that of Maxpread Technologies and promised investors daily returns of at least 1.5%.
Lastly, the California DPFI claims that QuantFund “falsely represented that it created an insurance fund to prevent any investor losses” and promised returns of at least 1%.
“Taking advantage of the hype around AI, these entities claimed to use AI to conduct the purported crypto trading. The pitch was simple: investors were told that if they invested funds, these entities would use their knowledge, skill, experience, and AI to trade crypto assets and generate incredible profits for investors. In each case, these claims are false,” said the California regulator.
It is important to note that the entities went to great lengths to appear to investors that they were legitimate businesses. They created “professional websites, maintained social media accounts, and were promoted on social media by influencers and investors who shared stories of the money they were supposedly making,” said the DFPI.
The California regulator noted that these companies appeared to be operating normally for a few months to years, and investors could see their account balance growing. In the initial days, investors’ withdrawals were instantly credited to their accounts.
The DFPI noted in the press that sometime later, “the scheme stops processing withdrawals and then the website goes dark, leaving investors without a way to access their funds. By then it’s too late, and the scammers have disappeared with investors’ money.”
As reported earlier by Bitnation, the DFPI warned investors against 17 crypto websites, stating that these are associated with fraudulent activities. Some of those were Tahoe Digital Exchange, TeleTrade Options, Tony Alin Trading Firm, Trade 1960, VoyanX.com, and ZC Exchange.