TDCI’s Securities Division Warns of Emerging Cryptocurrency Scams Involving Fake “Investment Education Foundations” and A.I. Bots

NASHVILLE – The Tennessee Department of Commerce & Insurance’s (TDCI) Securities Division is warning Tennesseans about a new, sophisticated investment scam involving fake “investment education foundations” that lure unsuspecting investors into the scam by promising education on stocks and cryptocurrency, “risk-free” trials, and loans. Instead of getting guaranteed returns and sophisticated advice, scammers are convincing investors to invest their money into the platform, take out fake loans, and pay exorbitant commissions.

"The rise of fake 'investment education foundations' is a concerning trend that preys on investors' desire to reduce the risk of investing in cryptocurrency," said TDCI Commissioner Carter Lawrence.  "These scams are designed to deceive. It’s crucial for investors to remain vigilant and skeptical of unsolicited offers before handing over their money."

How The Scam Works

• The scam typically starts with social media ads leading to WhatsApp groups managed by a fake founder and bots.
• Once the investor is in the group, the founder provides investment lessons, eventually introducing a fraudulent cryptocurrency exchange. Investors are enticed to test a proprietary A.I. bot with “free” tokens, which generate fake profits, leading to real money investments.
• If funds are lacking, fake loan providers on Telegram offer loans deposited directly onto the exchange. Investors can’t withdraw profits until they repay these fake loans or commissions, with accounts frozen for fake regulatory reasons.
• The scam is eventually shut down and restarted under new names.

Oftentimes, scammers legitimize their operations using real government and professional documents, including registration with the U.S. Department of the Treasury and the SEC. They may also post articles online to appear legitimate and use old website domains to seem established.

How to Protect Yourself from Investment Fraud

TDCI urges investors to exercise caution before responding to unsolicited investment offers, especially those received though social media, emails, or phone calls.

“Do not assume an education foundation is trustworthy just because it is promoted on social media,” said Assistant Commissioner for Securities Elizabeth Bowling. “Instead, if you have questions, you should contact our team to check if the education foundation and cryptocurrency exchange are registered.”

Suspect fraud or illegal activity?  Consumers should contact TDCI’s Securities Division at tn.gov/securities or 800-863-9117 for more information immediately.

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