Regulators in Alabama, Montana, and Texas have issued a joint statement banning trading bot and its developer Stefan Ciopraga, citing it as a Ponzi scheme and an unregistered securities offering.

The Montana securities regulator claimed that the product offered daily staking returns of 2.2% using Artificial Intelligence (AI) but provided no proof of trades or profitability.

Investors could deposit funds into the smart contract on the BNB Chain and earn rewards from multiple trading strategies.

The built-in AI reportedly analyzed markets and created a hybrid trading method with “exhilarating performance.”’s website also claimed it could trade 70 times more and generate 25% more profits than a human trader, allowing investors to withdraw profits daily.

However, failed to provide blockchain data or other information to investors, according to Montana’s filing, which would have enabled them to independently verify the cryptocurrency trades represented in the reports or their profitability. Consequently, the regulators issued a temporary ban on, and Ciopraga has 15 days to respond in writing.

The move follows Tesla CEO Elon Musk and other high-profile tech industry executives and academics calling for a temporary halt to training initiatives for AI more advanced than GPT-4, requesting that developers cooperate with policymakers to develop sound AI governance. Meanwhile, Coinbase CEO Brian Armstrong has countered the open letter’s premise, arguing that “experts” to draft rules for AI do not exist.

According to an Assistant Professor of Public Health at Texas A&M University, legally defining AI is the first step in regulation, as it aids in understanding which elements of AI are subject to laws. Lawmakers often resort to old laws in the face of rapidly evolving technology, creating regulatory loopholes that hinder societal benefits.

Regulators face a daunting challenge when dealing with crypto assets. Montana Commissioner Troy Downing said scammers are exploiting the hype around AI tools to mislead investors. However, electrical engineer John Villasenor suggests that any AI algorithm’s result can be tested for legality against existing laws.

In the YieldTrust case, the AI trading mechanics were not the lawsuit’s subject, but rather, the lack of disclosure and a potential unregistered securities offering.

Upcoming MiCA regulation in Europe addresses disclosure and admission to trading requirements for crypto assets not covered by existing law. Issuing a new crypto or listing it for trading on an exchange will require publishing a whitepaper.