Texas state regulators have issued cease-and-desist orders to two entities promoting fraudulent cryptocurrency schemes that involve the use of artificial intelligence (AI) and fake endorsements from Tesla CEO Elon Musk.
The Texas State Securities Board (TSSB) ordered the suspension of the activities of AI system, ‘Truth GPT Coin’, and cryptocurrency trading platform, ‘DigitalBank’, on Thursday. The TSSB claimed that the companies engaged in illegal and deceptive practices while promoting their digital assets.
According to the TSSB, Truth GPT Coin marketed its cryptocurrency with misleading claims about the profitability of its AI-based trading system. The firm also used fake endorsements from Elon Musk and falsely claimed that the cryptocurrency was backed by the US government. The TSSB deemed these practices to be fraudulent and ordered Truth GPT Coin to immediately stop its activities.
DigitalBank, on the other hand, was accused of soliciting investments from Texas residents without being registered to sell securities in the state. The company also claimed to have created a decentralized platform that allowed users to trade cryptocurrencies without relying on a central authority. The TSSB found these claims to be false and ordered DigitalBank to stop selling securities in Texas.
The Texas state regulator has been actively cracking down on fraudulent cryptocurrency schemes in recent years. The TSSB has taken action against numerous companies that engaged in illegal activities such as selling unregistered securities, making false claims about the profitability of their products, and defrauding investors.
The TSSB has also been warning investors to be cautious when investing in cryptocurrencies, particularly those that promise high returns with little risk. The regulator has emphasized the importance of conducting thorough research and seeking advice from financial professionals before investing in digital assets.
In a press release, Texas Securities Commissioner Travis J. Iles warned investors about the risks associated with cryptocurrency investments. “Investors should be wary of promoters who claim their products use new technologies to provide better returns with little or no risk,” he said. “The truth is that investing in cryptocurrencies can be risky, and investors should be prepared to lose their entire investment.”
The TSSB’s actions against Truth GPT Coin and DigitalBank are part of a broader effort by regulators around the world to crack down on fraudulent cryptocurrency schemes. In recent years, regulators in the US, Europe, and Asia have taken action against numerous companies engaged in illegal activities in the cryptocurrency space.