CFTC's OCEO Alerts the Public to AI-based Investment Scams

On January 25, 2024, the Commodity Futures Trading Commission’s (CFTC) Office of Customer Education and Outreach (OCEO) issued a customer advisory, warning the public of Artificial Intelligence (AI) scams.

According to Customer Advisory: AI Won’t Turn Trading Bots into Money Machines, fraudsters are exploiting public interest in artificial intelligence (AI) to tout automated trading algorithms, trade signal strategies, and crypto-asset trading schemes that promise unreasonably high or guaranteed returns. Scammers claim AI-created algorithms can generate huge returns—sometimes tens of thousands of percent—or yield 100 percent “win” rates. These dubious claims have been made about algorithms that automatically place trades, known as “bots,” and algorithms that provide buy and sell signals to subscribers, among others.

The advisory warns investors that claims of high or guaranteed returns are red flags of fraud and that strangers promoting these claims online should be ignored, emphasizing that AI technology can’t predict the future or sudden market changes.

“When it comes to AI, this advisory is telling investors, ‘Be wary of the hype,’” said OCEO Director Melanie Devoe. “Unfortunately, AI has become another avenue for bad actors to defraud unsuspecting investors.” OCEO is dedicated to helping customers protect themselves from fraud or violations of the Commodity Exchange Act through the research and development of effective financial education materials and initiatives. 

OCEO gives some items you should consider before trusting money to trading platforms that claim AI-created algorithms can generate huge returns:

- Research the background of the company or trader; conduct a reverse image search on key personnel to verify their identities.

- Research the history of the trading website by checking the age of the domain registration. 

- Get a second opinion. Talk the investment over with a financial advisor, trusted friend, or family member.

- Know the risks associated with the underlying assets. Also consider the impact fees, spreads, and subscription costs would have on returns.