The California Department of Financial Protection and Innovation (DFPI) has issued cease and desist letters to five crypto companies it has accused of being involved in scams. The companies, Maxpread Technologies, Harvest Keeper, Visque Capital, Coinbot, and QuantFund, are accused of offering unqualified securities and making false promises to investors. The regulator also accused the companies of using artificial intelligence (AI) to generate high returns in crypto trading and of using multi-level marketing tactics to lure in victims.
According to the DFPI, Maxpread Technologies attempted to trick investors about the identity of its CEO by using a fake AI-generated avatar programmed to recite a script. The firm’s CEO was said to be “Michael Vanes,” but the real CEO is actually Jan Gregory, who the company had called its chief marketing officer and corporate brand manager. Meanwhile, Harvest Keeper allegedly hired an actor to play its CEO, while claiming to use AI to maximize crypto trading returns.
The regulator labeled the companies as Ponzi schemes and said that investors were promised daily returns on investments between 0.6% and 4.81% using the companies’ knowledge, skill, experience, and AI assistance to trade crypto assets. In a statement, DFPI Commissioner Clothilde Hewlett said, “Scammers are taking advantage of the recent buzz around artificial intelligence to entice investors into bogus schemes. We will continue our efforts to protect California consumers and investors by going after these unscrupulous actors.”
This move by the DFPI is the latest in its efforts to stamp out crypto crime in California, following the collapse of FTX. The regulator joined other state regulators in investigating the cryptocurrency exchange and its founder, Sam Bankman-Fried. In December, the DFPI ordered MyConstant to cease offering select crypto products, as the sale of securities, including its primary lending platform and interest-bearing accounts, was prohibited. The five companies have been ordered to stop operating in California and are banned from selling or offering investments to residents in the state.