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Last week, the California Department of Financial Protection and Innovation (DFPI) announced its latest efforts to protect residents from crypto scams, sending cease and desist letters to five companies it claims attempted to profit from the AI hype train.

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Artificial intelligence is hot right now, and crypto scams haven’t slowed a bit. And allegedly, some scammers are mashing them up to deceive and swindle would-be investors, including creating a fake AI-generated CEO to try and dupe people.

The agency’s latest targets are Maxpread Technologies, Harvest Keeper, Visque Capital, Coinbot, and QuantFund—who the DFPI accused of each offering unqualified securities and making false promises to investors. The DFPI accused the companies of making exaggerated claims about generating high returns using AI for crypto trading, and layered in multi-level marketing tactics to lure in unsuspecting victims.

Scammers like to deceive investors by using phony CEOs, sham algorithms, & Ponzi schemes. Today, we’ve issued desist and refrain orders to five entities/individuals who violated CA securities laws.

In addition to trying to scam investors out of money, Maxpread Technologies is alleged to have “attempted to trick investors about the identity of the CEO using a fake, AI-generated avatar programmed to recite a script.”

In a YouTube video posted to its official Maxpread account on April 8, a claimed CEO named “Michael Vanes” gives an address about the company’s launch. But the agency claims that it’s not a real person; Maxpread’s real CEO is actually Jan Gregory, who the company had called its chief marketing officer and corporate brand manager.

Another company, Harvest Keeper, allegedly hired an actor to play its CEO—no AI-generated leaders in sight in that case, although the firm did claim to use AI to maximize crypto trading returns.

Also Read: Crunchbase Report: Web3 Funding Drops 82% Year To Year.

“Scammers are taking advantage of the recent buzz around artificial intelligence to entice investors into bogus schemes,” DFPI Commissioner Clothilde Hewlett said in a statement. “We will continue our efforts to protect California consumers and investors by going after these unscrupulous actors.”

Labeling them Ponzi schemes, the California regulator said that investors were told that if they invested funds, the companies would use their knowledge, skill, experience, and AI assistance to trade crypto assets and generate incredible profits for investors.

“In each case, these claims are false,” the DFPI wrote, saying the companies promised between 0.6% and 4.81% daily returns on investments.

The cease and desist letters are the latest in California regulators’ actions to stamp out crypto crime in the state. Following the collapse of FTX, the DFPI joined other state regulators in opening an investigation into the cryptocurrency exchange and its founder, Sam Bankman-Fried. In December, the DFPI ordered MyConstant to cease offering select crypto products, as the DFPI prohibited the sale of securities, including its primary lending platform and interest-bearing accounts.

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