Crypto scammer pleads guilty to AI trading bot scam

A cryptocurrency scammer has pleaded guilty to defrauding multiple individuals by promising lucrative gains via an artificial intelligence-powered trading bot.

According to a report from 5news, Kolin Lukas Deshazo, a resident of Springdale, California, orchestrated a cryptocurrency investment scam involving the use of AI. He lured investors by claiming he had developed a bot that could trade on the user’s behalf and generate high returns.

Per his plea agreement, Deshazo lied to his victims and never had a trading bot to begin with. Instead, he allegedly gambled away the funds solicited from his scheme.

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

By analyzing market data, such as price, volume, and historical data, bots can take advantage of market opportunities by executing trades faster and more efficiently than a human trader could. With the advent of AI, these bots became more adaptive and intelligent, utilizing 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 swiftly gained popularity among retail investors. Deshazo capitalized on the demand for easier access to crypto trading success by offering an automated solution that never existed.

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A video from August 2021 titled “Kolin Lukas Gambling with STOLEN BITCOIN Funds,” likely uploaded by a victim of the scheme, shows Deshazo at the 2021 World Poker Tournament. At the time, the Springdale Police Department had already investigated him in a December 2019 probe.

Per 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 $9000 worth of cryptocurrencies to a wallet controlled by Deshazo, who claimed the funds would be quadrupled in a year’s time.

However, investigations by federal authorities revealed no trading bot was linked to the wallet where the victim had transferred the funds.

Scams of this sort are not new in the crypto space and have only gotten worse with the rise of AI. Earlier this year, the Commodity Futures Trading Commission issued a warning regarding the rise of fake trading bots that claim to be “Money Machines.” The regulator added that claims of high returns are “red flags of fraud.”

Laurence Moroney, former AI lead at Google, previously cautioned crypto.news readers in an interview that the potential of AI-driven trading bots remains limited. He emphasized that while AI can assist in analyzing data, it cannot reliably predict market movements and the widespread use of such bots could even distort market dynamics, leading to inaccurate outcomes and potential market manipulation.

Read more: What are the best AI crypto trading bots, and can you trust them?

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