$24M Crypto Ponzi Scheme Exposes Dark Side of AI Hype

A $24 million cryptocurrency Ponzi scheme has been uncovered in a case that highlights the intersection of AI and crypto hype.

Brent Kovar, a Las Vegas businessman, was convicted on August 24 of running Profit Connect, which presented itself as an artificial-intelligence company mining cryptocurrency on a supercomputer. However, this technology did not exist.

Kovar told investors that the software of Profit Connect was capable of running on a supercomputer that mined cryptocurrency and verified transactions, offering a guaranteed return ranging from 15% to 30% with a full refund guarantee. In reality, the firm did not have any profits or reserves to meet its promises.

The scheme involved at least 400 investors who gave over $24 million, which was used by Kovar to fund his business and personal expenses, including buying gifts for employees and purchasing his house. The scheme also claimed that the depositors' money was protected through the Federal Deposit Insurance Corporation (FDIC) and Profit Connect had crypto reserves valued in the hundreds of millions of dollars.

Regulators had acted against Profit Connect before, with the US Securities and Exchange Commission (SEC) securing an emergency order of asset freeze against the company in July 2021. The conviction comes at a delicate time for the digital-asset industry, which is grappling with record illicit activity and trying to maintain investor trust.