Texas Leads Coordinated States Action to Stop Artificial Intelligence Investment Scam. The AI was Purportedly Endorsed by Elon Musk and Comparable To CHATGPT

May 3

Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order to stop an investment scheme purportedly powered by artificial intelligence and endorsed by Elon Musk.  The Texas State Securities Board led a group of regulators that include the Alabama Securities Commission, the Montana State Auditor, the Kentucky Department of Financial Institutions, and the New Jersey Securities Bureau in bringing coordinated actions against Horatiu Charlie Caragaceanu and his organizations, The Shark of Wall Street and Hedge4.ai. 

Caragaceanu is allegedly describing The Shark of Wall Street and Hedge4.ai as “artificial intelligence labs” that act through “machine learning programmers and ethical hackers.”  According to the order, they are promoting TruthGPT Coin, a cryptocurrency that purportedly uses an artificial intelligence model called Elon Musk AI.  This artificial intelligence model is purportedly able to analyze various cryptocurrencies, predict future digital asset prices and differentiate profitable investments from scams.  The respondents are also touting the profitability of TruthGPT Coin – even claiming that TruthGPT Coin will increase in value by as much as 10,000 times.  

According to the order, investors are also being told Elon Musk endorses TruthGPT Coin, and animated avatars and images of Elon Musk are being used to demonstrate his endorsement.  Promotional media shows the purported involvement of various other public figures.  For example, the website for TruthGPT Coin (truthgptc.com) is allegedly designed to create the appearance that Changpeng “CZ” Zhao, the founder and CEO of Binance, and Vitalik Buterin, the founder of Ethereum, are part of the ecosystem.  The website even purports to incorporate a communications platform that permits users to interact with these and other public figures.

“Artificial intelligence is buzzing.   It’s received extensive coverage by traditional media, is trending in social media and has the potential to impact many different industries,” said Commissioner Iles.  “Bad actors continue their attempts to capitalize on this widespread public interest.  They’re devising schemes that create the appearance they have developed sophisticated artificial intelligence platforms – but instead of being rooted in artificial intelligence, the offerings too often are nothing more than frauds. I would like to acknowledge Joe Rotunda’s leadership in leading the latest collaboration among state securities regulators in protecting our respective investors.”

According to the Texas action, Caragaceanu, The Shark of Wall Street and Hedge4.ai.have previously engaged in a series of initial coin offers (ICOs), deploying tokens on the Ethereum blockchain and Binance Smart Chain.  They allegedly touted the profitability of the tokens through internet websites and social media, claiming an early offering was tied to a “money making machine Artificial Intelligence Lab,” another cryptocurrency related to an African diamond and gold mining project, and a different asset had “the potential to go 1000x.  Not 100x.  Not just 100x.  It’s 1000x.”  The respondents also allegedly told investors they could stake certain tokens to earn even greater profits – as much as 2000% per year.  

Despite their representations, the tokens previously offered by the respondents never significantly increased in price and the tokens never secured listings on major centralized cryptocurrency exchanges.  The fair market value of each token is now $0, according to the orders.

“Artificial intelligence is designed to simulate human intelligence processes.  It’s a highly sophisticated concept, but that doesn’t mean current investment schemes tied to artificial intelligence are as sophisticated,” said TSSB Enforcement Director Joe Rotunda.  “At least for now, many of these scams are simply promoting lucrative profits coupled with little or no risk.  They’re publishing advertisements in social media, recruiting investors through direct messaging platforms, and creating internet websites that incorporate flashy graphics and technical terminology. Investors need to set aside emotion and objectively evaluate every offering – especially when pitched by an unknown person through the internet.”

TruthGPT Coin and the other investments named in the order have not been registered for sale in Texas, and Horatiu Charlie Caragaceanu, The Shark of Wall Street and Hedge4.ai have not been registered as dealers or agents.  They have 30 days to request a hearing.  

CONTACT:    Joe Rotunda, Enforcement Director, at jrotunda@ssb.texas.gov and Jane Lee, Enforcement Attorney, at jlee@ssb.texas.gov.