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CFTC Cautions Against Artificial Intelligence Trading Bots, Unable to Pick Crypto Winner

The US Commodity Futures Trading Commission (CFTC), in a recent advisory published Thursday, January 25, warns hopeful crypto investors against entrusting their funds to artificial intelligence (AI) trading bots. The advisory by the watchdog indicates that most trades executed via AI trading bots result in a 100% loss. 

CFTC Advisory Warns Against AI-powered Trading Bots

The CFTC’s Office of Customer Education and Outreach (OCEO) acknowledges that AI is increasingly integrated into individuals’ daily lives. The integration attracts scammers to exploit the AI potential through audacious claims that AI-powered trading bots yield substantial returns. 

The OCEO adds that bad actors praise the rewards and returns realized through trade signal algorithms to unsuspecting investors. The fraudsters are luring potential investors to entrust their funds through crypto-asset arbitrage algorithms. 

OCEO director Melanie Devoe decries that the prevalence of social media platforms and the emergence of influencers facilitate the dissemination of misinformation. The process is easing fraudsters through persuasive interviews in luring unsuspecting investors. 

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Devoe reiterates the need for vigilance in AI reliance, as conveyed by the Thursday advisory to mind the hype by fraudsters disguised as trading experts using bots. 

Devoe highlights the unfortunate reality that artificial intelligence has transformed into an avenue for criminal actors to defraud unsuspecting investors.

AI Unable to Predict Future Trade Outcomes

The CFTC release warns that investors are pursuing channels to realize massive crypto gains against reliance on trading bots. The CFTC regrets that AI cannot predict the future despite its popularity in the US. 

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The CFTC statement informs crypto investors who aspire to reap significant returns to avoid the lure created through exaggerated promises using AI. 

The advisory titled Customer Advisory Cautions the Public to Beware of Artificial Intelligence Scams warns investors to resist the promises of impressive yields fraudsters claim by using bots, arbitrage algorithms, trade signal algorithms and AI-assisted technology.  

Devoe laments that social media platforms and influencers facilitate the spreading false information. The OCEO director adds that malicious actors use AI to exploit novice investors. 

The watchdog urges investors to prioritize background checks of companies and traders before committing money to trading bots and trade-signal providers. The advisory by the agency expands the scope from the previous year’s discussion, where AI-driven trading bots emerged as a significant focal point of debate in the crypto industry. 

OCEO Commits to Empower Customers From Fraud

The OCEO reiterated its commitment to empower customers to shield them from fraud via developing effective financial education initiatives. The latest advisory is part of the outreach program that targets retail investors, regulators, traders and consumer protection groups.

The OCEO urged the investors to execute thorough research, ensure second opinions and understand inherent risks. The advisory challenges investors to exercise caution amid the hype online strangers and social media influencers promote. 

A reflection of regulators’ actions against disguised fraud involves the April 2023 incident when several state agencies acted against an AI-trading bot promoted as yielding returns at 2.2% daily. 

Securities regulators drawn from Alabama, Texas, and Montana declared the crypto trading YieldTrust.ai ran a Ponzi scheme. The regulators indicated that the platform lacked proof of using an AI-trading bot or could not realize the impressive levels exhibited in the marketing campaigns.

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Blockchain analytics firm Arkham Intelligence highlighted the case where a crypto trading bot executed a $200 million flash loan in mid-2023 to secure a meagre $3.24 in profit. 

Bitget Embraces AI Bots

The criticism of AI bots has not slowed down crypto exchanges led by Bitget from pursuing their utilization of the platforms. 

Bitget chief executive Gracy Chen admitted in July last year that the platform was utilizing Commodities Trading Advisor (CTA) AI-powered bot. The executive added that the CTA is operating continuously and receiving historical strategy in data analysis and processing, thus guaranteeing self-learning. 

Chen hailed the self-learning capability in CTA as allowing users to make informed decisions while spending less time learning complex trading strategies. The executive hailed the AI strategies as facilitating users in selecting and creating more intuitive analyses using simple price charts. It saves the users the necessity of filling out the complex algorithms’ parameters. 

Editorial credit: T. Schneider / Shutterstock.com


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Stephen Causby

Stephen Causby is an experienced crypto journalist who writes for Tokenhell. He is passionate for coverage in crypto news, blockchain, DeFi, and NFT.

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