What Do Crypto and AI Get-Rich-Quick Schemes Have in Common? FOMO and Flimsy Due DiligenceA new wave of fraudulent investment schemes is coming — and it's powered by AI.
ByAlan Rosca•
Key Takeaways
- Schemes are coming that will likely mirror in many ways an earlier fraud wave that crashed in 2022 after a ten-year run that caused tens of billions of dollars in investor losses and was driven by cryptocurrencies and blockchain.
- Investors and their advisors should take notice.
Opinions expressed by Entrepreneur contributors are their own.
During the heyday of the crypto and blockchain industry, many investors looking at highly publicized fortunes seemingly made overnight started experiencing theFear Of Missing Outand decided to try and get a piece of the supposedly fabulous wealth that was being created.
Unscrupulous promoters and companies were watching. They started offering dubious investments, targeting unsophisticated investors. Cryptocurrency and blockchaininvestment opportunitieswere sometimes little more than wishful thinking, while their promoters and sponsors had no history, qualifications or past accomplishments to speak of. Some turned out to be outright frauds. While many crypto and blockchain startups that sought to raise money from investors were good–faith entrepreneurial initiatives driven by ethical individuals,many otherswere not.
Crypto-fraudsters developed sophisticated ways to placate legitimate questions by investors: lack of industry background by a startup's founder? It's a new industry, so no one has much experience with it. Lack of prior performance? Same answer. Extraordinarily high rates of return? It's a booming industry, and everybody seems to be making multiples of their investment. No auditor or outside law firm? It's a new field, and those old-school auditors and lawyers are staying away because they don't understand how it works. Are regulators asking questions? Same answer as before: new industry, those stodgy regulators don't understand how it works. Completelack of transparency? This is how all players in this new industry do it, so that's the norm. Founderplaying computer gameswhile asking investors for money? That's proofhe's brilliantand able to multi-task. Easy-to-replicate drawings of monkeys of dubious artistic value offered for hundreds of thousands of dollars apiece? Every othercelebrity is getting one,so they must be worth a lot of money.
