State securities regulators in Texas, Montana and Alabama have taken action to shut down YieldTrust.ai – a decentralized application that promised investors they would receive a 2.6% return daily on their investments by using its AI-backed trading solutions. According to the order released by the joint regulators, the company claimed that its AI-backed solutions could execute up to 70 times more trades with 25 times higher profits than any human trader.
The enforcement action taken by the three states highlights the scale of fraud and deceptive practices that have been rampant in the AI hype of the past couple of years. Joe Rotunda, the Director of the enforcement division of the Texas State Securities Board, commented in an interview that the securities regulations need to be able to keep up with the digital age and the rise of bad actors targeting unsuspecting investors.
YieldTrust’s website is no longer active, and it has not provided any response to the enforcement action. Rotunda gained insight into the operations of YieldTrust by assuming the role of an investor and watching promotional videos along with looking at its Telegram channel. He found that two unknown people had been trying to draw in investors by promising them a sophisticated AI-based technology with a great history of success.
The whole incident has brought to limelight the risks that investors have been facing when dealing with the relatively new technology of AI. The global AI market is projected to grow at an enormous rate of 24.5 percent, and this only serves to attract fraudulent promoters and organizations, who use the hype and promise of huge returns to defraud innocent investors.
YieldTrust has not been registered with the securities boards of any of the three states, and the case stands as an example of how digital investment solutions often function outside of the traditional securities regulations. Rotunda has rightly warned the investors of the dangers of getting involved with AI-based investments, noting that it is an “absolute trap” for unsuspecting investors.
The Texas State Securities Board and Montana’s Securities Department have also issued cease-and-desist orders against YieldTrust, ordering it to stop any solicitation or offering of securities. Alabama’s Securities Commission ordered the company and its officers to cease any actions related to the scam.
The action taken against YieldTrust is believed to be the first of its kind targeted at a promotion related to AI. It is further proof of the need to prioritize fraud detection and enforcement if legitimate AI solutions and investment opportunities are to be allowed to thrive.