The New Jersey Bureau of Securities issued a cease and desist order in connection with a cryptocurrency scheme allegedly endorsed by Elon Musk.
The claims are against a website called TruthGPT, which was removed after the order was issued.
TruthGPT was mining its own crypto-token called TruthGPT Coin, which was promoted by two organizations called "Shark Wall Street" and "Hedge4.ai," named "defendants" in an official Securities and Exchange Bureau document.
These were all coordinated by a man named Horatio Charlie Caragacheanu, who described these enterprises as "artificial intelligence labs" using "machine learning programmers and ethical hackers" in their work.
Caragacheanu also explained that an artificial intelligence model called "Ilon Musk's AI" is directly incorporated into the TruthGPT coin so that it can allegedly analyze the cryptocurrency market and predict future asset prices.
All of the defendants named in the lawsuit said TruthGPT Coin would increase its value by a factor of 1,000 based on data allegedly provided by the artificial intelligence tool, which, along with its name, led to the suspicions raised by authorities.
Attorney General Matthew J. Platkin said: "These miscreants give the impression that using artificial intelligence is a win-win scheme to get rich quick. But they downplay the risks associated with investing and could potentially harm investors and their savings."
The order states that nothing they promised investors has actually come true: the estimated 2,000% annual return never came close to original projections, and all of the digital assets offered by the defendants are currently worth $0 - they have failed to get listed on any of the major centralized crypto exchanges.
This falls under the "too good to be true" principle seen in any attempted fraud, according to Kari Feis, acting director of the Division of Consumer Affairs.
"Scammers attract investors with social media ads that contain flashy graphics, use technical terminology and promise significant returns combined with little or no risk," Feis added. "But as we tell investors, if something seems too good to be true, it probably is."
New Jersey Bureau Acting Chief Amy G. Copleton spoke more about the case, commenting, "The Bureau continues to work hard to protect New Jerseyans from fraud and deception in online investment offerings, and we urge investors to help protect themselves by ignoring flashy charts and promises of high returns and to approach new investment products with caution."
"Raising public awareness about cryptocurrency fraud and the risks associated with unregistered securities is an important part of the Bureau's mission. An informed investor is the best defense against financial predators."
