Kansas Insurance Department
TOPEKA – The Office of the Kansas Securities Commissioner, a division of the Kansas Insurance Department, warns investors to be aware of a new type of scam involving the purchase of artificial intelligence algorithms by investors for the purpose of trading cryptocurrencies promising abnormally high returns.
“New technology can often bring with it new scams,” Kansas Insurance Commissioner Vicki Schmidt said. “While the potential exists for AI algorithms to create positive returns on an investment, Kansans should do their own research before investing in any AI or cryptocurrency related offering.”
These scams work by offering investors the opportunity to invest in an AI platform that uses automation to trade cryptocurrency. They often contain a multi-level marketing element that promises additional returns for every additional investor brought to the offering.
In some cases, these schemes will also offer a secondary investment called an initial coin offering (ICO), which comes with a narrow window of investment opportunity. These ICOs will offer the same cryptocurrency token listed in the ICO as the interest payment source to investors or higher returns if the investor purchases both the AI trading algorithm with the ICO. All these elements combine into a fraud that promises incredibly high returns with little effort—both hallmarks of fraud.