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AI Investment Scams are Here, and You’re the Target!

The investment marketplace has been experiencing a period of rapid technological change. Artificial intelligence (AIinvesting is the latest technology to make a wave in the investing landscape. AI is a broad term that refers to several different technologies that enable computers to sense, understand, act, and learn with human-like levels of intelligence. Unfortunately, scammers are aware of the hype around AI and are using these emerging technologies to their advantage to trick investors. Follow these expert tips on how to protect yourself from AI investment scams and fraud. 

Generative AI versus Predictive AI

Generative AI and predictive AI, while both under the umbrella of artificial intelligence, function differently. Predictive AI is more like a fortune teller. It’s designed to predict future outcomes based on existing data. It looks at patterns and trends in the data it’s been fed and uses that information to predict what might happen next. For example, predictive AI can forecast stock market trends or suggest the next word in a sentence as you type on your phone.  

Generative AI, like its name suggests, focuses on generating new data or content. Like an artist creating a new painting, it can invent novel ideas, stories, or designs based on trained data. For example, generative AI can be used to create new audio, images, text, and videos by learning from existing ones. You may have had experiences with websites or apps that use generative AI to generate human-like responses in chat conversations.  

Much of the recent buzz around AI has focused on technology advances in generative AI. While generative AI is impressive in its ability to create new content, it’s important to remember that it’s essentially drawing from vast amounts of information it has been trained on and does not possess an understanding of the real world as humans do. For instance, it might generate information about people, places, or facts that seem believable, but may not be accurate. Generative AI extrapolates information from the patterns it has learned and sometimes these patterns can lead to erroneous results. It doesn’t have the ability to independently verify facts or context like humans. So, while generative AI can be a powerful tool for ideation and creativity, it’s always crucial to cross-check the information it provides, especially when it comes to important facts and details. 

What is AI investing?

AI investing uses software and algorithms to analyze market trends and make predictions based on historical data. AI stock trading software also takes price volatility and risk into consideration when analyzing investments. Today, most online investment platforms offer some sort of AI mobile investing apps, AI trading bots, or intuitive website designs that integrate AI technology into investing strategies. AI investing holds the promise of providing investors with the information they need to make informed decisions about a continuously expanding pool of investment options. 

Scammers are Using Terms like “AI” to Steal Money from Investors 

Scammers are aware of the hype around AI and are using this hype to their advantage to trick investors. One common type of investment fraud is where scammers use certain buzzworthy terms to entice investors to hand over their money. The DFPI has recently noticed an increase in investment scams that claim to use AI to make money for investors. Usually, these types of investment frauds claim that their AI can trade crypto on behalf of investors and generate too-good-to-be-true profits. 

AI is Being Used to Trick Investors 

Investors must be careful about what they see and hear because fraudsters are using AI, and the buzz around AI, in creative ways to con investors.  

  • AI can be used to create people who don’t really exist. In one example, a purported crypto investment platform created a YouTube video in which its “CEO” touted the company to prospective investors. In reality, this was a hoax: the individual was not the company’s CEO, but rather a fictitious avatar programmed with AI to recite a script. 
  • AI can also be used to clone voices. So if you receive a phone call from someone who sounds just like a friend or family member, it may actually be a scammer using a clone of their voice. 

How to Protect Yourself 

  • Be aware that scammers lie to investors about supposed investment opportunities. Many investment platforms that claim to trade crypto on behalf of investors are complete scams with no actual trading activity. 
  • Be cautious about investment platforms that claim to use AI to generate returns for investors. In many cases, these claims are lies intended to trick investors into handing over their money (often in the form of crypto assets). 
  • Be very suspicious of people promoting certain investment opportunities on online platforms, such as YouTube and Telegram. The DFPI regularly tracks new scams that originate on these platforms. 
  • Some schemes, such as Ponzi or pyramid schemes, rely on users to refer others to make money. Ponzi schemes pays “profits” to earlier investors with funds from more recent investors. Pyramid schemes pay commissions to recruit new investors. An investment “opportunity” that asks you to recruit new investors may be a red flag. 
  • Watch out for investments that promise high returns with little risk – if it seems too good to be true, it usually is! 

Contact the DFPI 

The DFPI urges consumers to exercise caution before responding to any solicitation offering investment or financial services. To check whether an investment or financial service provider is licensed in California, search the provider directory on the DFPI website. Consumers may also contact the Department at ask.dfpi@dfpi.ca.gov or call toll-free at (866) 275-2677.  

If a consumer believes a person or company has violated state law or acted improperly regarding a consumer financial product or service, we encourage them to submit a complaint with the DFPI. If you have questions about crypto assets, please contact crypto@dfpi.ca.gov. 

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Last updated: May 24, 2023 @ 11:55 am