Top Attorney Reports US DOJ to targets pre-IPO AI frauds

IPO AI frauds: The leading lawyers of the U.S. Justice Department in San Francisco are targeting the AI and other tech businesses that scam investors prior to their decision to launch IPO.

A year ago when Ismail Ramsey became the  U.S. attorney for the Northern District of California, he said that his office catches the tech start-ups that scam investors before the launch of initial public offerings (IPOs).

Ismail Ramsey also has close ties with Silicon Valley venture and angel investors.

During an interview, he told Reuters, “These ‘fake it til you make it’ pre-IPO frauds erode the integrity of public and private financial markets.”

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He also added that entrepreneurs often lie to investors to attract investor’s interest in an offering. They lie to investors about important details like customer reach, revenue, and production.

Ismail Ramsey said that as per the reports, ‘Theranos’ was involved in these types of startup frauds, the founder of ‘Theranos’ Elizabeth Holmes, and chief Ramesh “Sunny” Balwani were found guilty.

According to the reports, they found deceiving to the Silicon Valley investors regarding the blood-testing technology of the company. Another startup fraud was reported by uBiome Inc. which is a San Francisco company whose co-founders were alleged deceiving its investors about its capacity to develop more clinical tests to keep track of gut health.

Ramsey reported that AI will be a major focus as the growth of AI has also increased the interest of investors in AI stocks such as Nvidia which has helped the US marker to reach a new level in just few months.

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Ismail Ramsey further added, “As with any such emerging technologies, AI is fertile ground for fraudsters to make false and exaggerated claims.”

The U.S. government is closely monitoring AI stocks and due to such statements, the Securities and Exchange Commission (SEC) fined two investment advisers on Monday.

In 2023, Ramsey chose Jina Choi to become the head of a team that focuses on corporate crime, including accounting and securities fraud and many others.

During Jina Choi’s supervision, the SEC filed a civil complaint against Theranos, Tesla Inc. and the company previously known as Yahoo!.

Currently, the team is leading a case against a UK IT entrepreneur who was previously known as “Britain’s answer to Bill Gates.”

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