Crypto scammer pleads guilty to AI trading bot scam

A cryptocurrency scammer has admitted to defrauding scores of people by promising them profits through an AI-powered trading bot.

According to a report by 5news, Kolin Lukas Deshazo of Springdale, California, ran a cryptocurrency investment scam using artificial intelligence, luring investors by claiming to have developed a bot that could trade on behalf of the user and generate high returns.

According to his plea agreement, Deshazo lied to his victims and never used a trading bot to begin with, instead allegedly gambling away funds solicited from his scheme.

Trading bots are not a new concept; long before the advent of cryptocurrencies, they existed in traditional markets as programs designed to execute trades based on predefined strategies and algorithms on exchanges.

By analyzing market data such as price, volume, and historical data, bots can capitalize on market opportunities by executing trades faster and more efficiently than a human trader could. With the advent of AI, these bots have become more adaptable and intelligent, using machine learning to refine their strategies and respond to market conditions in real time.

Due to the complexity of market dynamics, cryptocurrency trading has typically been the domain of professional traders. As a result, AI trading bots have rapidly gained popularity among retail investors. Deshazo has capitalized on the demand for easier access to crypto trading success by offering an automated solution that has never existed before.

A video titled “Kolin Lukas Gambles STOLEN BITCOIN Funds” from August 2021, likely uploaded by one of the scheme’s victims, shows Deshazo at the 2021 World Series of Poker. At the time, the Springdale Police Department investigated him in a December 2019 investigation.

According to the report, one of the victims told the FBI that Deshazo “operated a crypto investment group” on the popular messaging platform Telegram. There, the victim transferred $9,000 worth of crypto to a wallet controlled by Deshazo, with Deshazo claiming the funds would quadruple within a year.

However, investigations by federal authorities revealed that there was no transaction bot connected to the wallet through which the victim transferred the money.

These types of scams are not new to the crypto space and have only gotten worse with the rise of artificial intelligence. Earlier this year, the Commodity Futures Trading Commission issued a warning about the rise of fake trading bots claiming to be “Money Machines.” The regulator added that claims of high returns were “red flags of fraud.”

Laurence Moroney, former AI leader at Google, previously warned crypto.news readers in an interview that the potential of AI-powered trading bots remains limited. He emphasized that AI can help analyze data but cannot reliably predict market movements, and that widespread use of such bots can distort market dynamics, leading to inaccurate conclusions and potential market manipulation.