The focus of the U.S. Securities and Exchange Commission (SEC) has shifted towards combating “AI washing,” where companies deceive by falsely claiming to utilize artificial intelligence technology.
In a recent video message, SEC Chair Gary Gensler cautioned against investment advisors and public companies making misleading assertions about employing AI models to enhance returns and inflate stock values.
Daren Firestone, a legal expert at Levy Firestone Muse, specializes in assisting whistleblowers in uncovering fraudulent activities and securing rewards. He is the creator of cryptowhistleblower.com.
Gensler emphasized the SEC’s commitment to ensuring transparency and honesty in such claims within the financial sector.
Recently, the SEC settled charges with two investment firms, Delphia and Global Predictions. Delphia, managing $187 million in assets, was penalized for falsely promoting its use of machine learning for investment decisions since 2019. Similarly, Global Predictions faced consequences for inaccurately stating its utilization of AI-driven forecasts without evidence.
These actions resulted in fines totaling $400,000, signaling the SEC’s intolerance towards deceptive practices like AI washing.
With the increasing prevalence of AI-related domains, the SEC’s vigilance is crucial in distinguishing genuine AI applications from deceptive claims. The ambiguity surrounding AI’s definition underscores the importance of verifying such assertions to prevent misleading investors.
Through legal actions like the case against Brian Sewell and Rockwell Capital Management LLC, where false claims of employing AI in cryptocurrency trading were exposed, the SEC aims to combat fraudulent schemes exploiting the AI trend.
As AI continues to gain prominence in the financial landscape, the SEC’s proactive stance serves as a deterrent to potential fraudsters looking to capitalize on the AI hype and mislead investors.
