What do artificial intelligence, supercomputers, and cryptocurrencies have in common? They’re all popular topics of conversation that very few people truly understand. Oh, and the Securities and Exchange Commission (SEC) said they were all used in a Ponzi scheme that raised $12 million from at least 277 retail investors.
The SEC accused 86-year-old Joy Kovar and her 54-year-old son, Brent, of raising funds for a company called Profit Connect Wealth Services by “assuring investors that their money would be invested in securities trading and cryptocurrencies based on recommendations made by an ‘artificial intelligence supercomputer'” since at least May 2018.
The mother-son duo also claimed their supercomputer could “guarantee investors fixed returns of 20-30 percent per year with monthly compounding interest,” according to the SEC, which is far greater than most investment companies offer. All it took was faith in an AI that invested primarily in cryptocurrency-related assets.
That faith was unfounded. The SEC said that “the defendants did not use funds received from investors to trade securities, buy cryptocurrencies, or do any of the things that Profit Connect promised its investors it would do with their money.” The money was instead used to enrich the Kovars and keep the scheme going.
It’s easy to see why investors might be duped by something like this. AI has become increasingly capable, supercomputers have grown more powerful, and the crypto market has made its way into the mainstream despite the volatility of even the most well-established cryptocurrencies. Why shouldn’t all three of those factors intersect?
Luckily SEC Los Angeles Regional Office director Michele Wein Layne offered some advice that should allow investors to see through even AI-powered, supercomputer-involving, cryptocurrency-trading schemes: “Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss.”