Fake “ChatGPT” and “Bing” crypto tokens are created by scammers

Fake “ChatGPT” and “Bing” crypto tokens are created by scammers

Scammers are trying to cash in on the hype surrounding popular artificial intelligence chatbots including OpenAI’s ChatGPT and Microsoft’s Bing AI.

A search on DEXTools, an interactive crypto trading platform that tracks prices, reveals approximately 287 tokens that mention “ChatGPT” in their name.

However, Microsoft or OpenAI, the developer of ChatGPT, has announced an official launch in cryptocurrency.

It turns out that these digital coins are not actually associated with the viral AI tools, and many may be “pump and dump” schemes intended to deceive investors.

A “pump and dump” scheme, also known as a “rug pull”, occurs when fraudsters generate a lot of interest in a particular coin that is trading at a low price. They then market the coin and convince investors to pour money into it to drive the price higher.

When the price reaches a certain level, the fraudster floods the market by selling his portion of the coin at the high price and collecting the profit. Traders, on the other hand, are left with a coin that rapidly declines in value due to the increased supply.

Peckshield, a blockchain security firm, discovered dozens of newly created “BingChatGPT” tokens, the company said in a chirping February 20. The firm has identified at least one of these digital coins to have been created by a user notorious for “pump and dump” crypto schemes.

Why are tokens allowed to misuse ChatGPT and Bing’s name?

Legally, scammers are not allowed to name their token after ChatGPT, Bing or other trademarked names without being affiliated with those companies, but cracking down on the practice is difficult.

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“These things move so fast, by the time a lawyer’s letter reaches the right people, the people behind the tokens have probably moved on to something else,” James Ledbetter, editor and publisher of the fintech newsletter.FINE”, tells CNBC Make It.

Scam crypto tokens are often deployed on “permissionless blockchains” also known as public blockchains, said Chen Arad, CEO of Solidus Labs, a cryptocurrency risk and market monitoring company. This means that anyone can issue any token (using any name) to users on the platform without having to be given permission by an administrator or moderator.

“On the one hand, no one needs to allow activity, which potentially enables accessibility and more open financial services,” says Arad. “On the other hand, it creates new challenges like this, where fraudsters benefit from transparency and new tools are needed to simplify and assess risks such as fake impersonation symbols.”

How investors can protect themselves

Crypto investors should be wary of newly created tokens that use the name of popular products or celebrities.

For cyberthieves, it can be an effective way to get the attention of investors who want to make a quick profit, and make them make FOMO-driven decisions without much thought, says Arad.

One of the most notable examples is The Squid Game token, which billed itself as a “play-to-earn” cryptocurrency, where users buy crypto and put it in a virtual wallet connected to an online or mobile game.

A March 9 public service announcement from the FBI warned that some scammers advertise tokens as games to earn, telling victims they will earn more in-game rewards by depositing more crypto into their wallets. But when users stop depositing digital funds, criminals empty the victim’s wallet using a malicious program that the victim unwittingly activated when they joined the game, the FBI warns.

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However, the Squid Game token turned out to be a “rug pull” scheme instead. The developers left the project abruptly before the game was due to launch and managed to steal over $3 million from investors at the end of 2021, says Arad. And they did this simply by using the name of the famous show at the right time when it was trending, he adds.

The best way to avoid these scams is to stay away from crypto altogether, says Ledbetter. Otherwise, like investors in other assets, crypto traders should do their research before buying a new token.

Fraudsters count on investors to make quick, uneducated decisions based on the fear of missing out, says Arad. So a red flag to look for is if a cryptocurrency promises that you will make a lot of money by investing in it.

“Only scammers will guarantee profits or large returns,” warns the Federal Trade Commission’s website. “Don’t trust people who promise you can make money quickly and easily in the crypto markets.”

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