In Season 3 of State AG Pulse which will launch in Fall 2023, we’ll be bringing you a new approach to state AG news. Each week we’ll choose one story from our curated summary of the week’s state AG news to explore in greater detail, tease out the key themes and provide new insights into the role of State AGs. In this special sneak preview, Chris Allen and Emily Yu dig into a story from last week’s state AG news about a cryptocurrency scheme that set off flares in the state AG world.
(00:03): Chris and Emily introduce themselves and explain how season 3 of State AG Pulse will work.
(01:22): Emily outlines today’s blog story out of New Jersey, which involves the AG’s office, the Bureau of Securities and one Horatiu Charlie Caragaceanu. Caragaceanu runs two companies, Shark of Wall Street and Hedge4.ai, selling crypto that they claimed was backed by AI and algorithms developed by Elon Musk. The cryptocurrencies, primarily TruthGPT Coin, were also purportedly endorsed by Musk and other high profile tech personalities and claimed to offer a 1000% ROI. The Bureau of Securities in New Jersey and the AG’s office ordered Caragaceanu and the companies to cease operations.
(04:21): Chris points out that the NJ Bureau of Securities falls within the AG’s office and that both cryptocurrency and AI/algorithms are topics that AGs are particularly focused on at the moment. One of the allegations in the complaint is the notion that crypto is a security and should be regulated as such, a position also taken by AG Letitia James in New York.
(05:40): Emily points to a letter headed up by AG Tim Griffin in Arkansas, in which he and 12 other AGs have submitted a comment to the SEC arguing that crypto should not be considered a security, as evidence that AGs from both sides of the aisle are getting involved on the securities regulatory issues surrounding cryptocurrencies.
(06:47): Chris teases out some of the nuances of different approaches to the regulation of crypto and AI, both issues where AGs are leading the discussion.
(08:04): Emily references the recent NAAG Symposium in Philadelphia, where several panels talked about what algorithms are and how state governments can use them, as well as what they should be wary of.
(08:40): Chris makes the point that as the preeminent consumer enforcers in this country, it’s AGs’ duty to protect consumers, and they take that job very seriously, using their broadly written UDAP statutes.
(09:32): Emily picks up on Chris’ point about UDAP statutes, and notes that the basis for this cease and desist order was a state securities law, despite the fact that these crypto companies and their owner deployed false advertising and misleading marketing practices that would normally be regulated under state UDAP statutes
(10:16): Chris notes the converse, which is that AGs might well use their UDAP statutes, which carry hefty penalties, particularly if they did not have securities authority as in the NJ case.
(10:38): Emily muses on what other states may get in on this case, and the implications for companies in the crypto and AI space.
(11:20): Chris notes the even law-abiding businesses using AI and algorithms to grow and enter new arenas need to pay attention, since if AGs perceive an uptick in fraud, they will become much more vigilant.
(11:57): In her closing thought, Emily predicts that as AGs’ interest in big tech continues, even smaller companies and newer companies using these technologies may find themselves the target of AG scrutiny.
To listen to the full podcast, click here https://www.stateagreport.com/podcast/nj-ag-takes-on-ai-backed-crypto-tool-that-claims-1000-returns/. To listen to a particular section, open the recording and use the time stamps provided above to navigate to the desired part.
To read more about the news story on which this podcast is based, click here: https://www.stateagreport.com/news/new-jersey-orders-crypto-sellers-to-stop-making-allegedly-misleading-marketing-claims-invoking-ai-tech-personalities/