Arbitrage Bots: When a Real Strategy Becomes a Fraud Disguise

Arbitrage sounds sophisticated and low-risk — which is exactly why, as Felix Bick explains in Chapter 21 of How Not to Get Scammed by AI Trading Apps, it’s become a favorite label for fraudulent schemes wanting to sound technically credible.

Bick starts with the legitimate version: arbitrage strategies profit from small price discrepancies for the same asset across different markets or exchanges. Genuine crypto arbitrage opportunities do exist, but they’re typically small in percentage terms, require significant capital to be worthwhile after transaction costs, and are increasingly captured by professional high-frequency operations with infrastructure advantages retail bots simply cannot match.

This context makes the book’s core warning land clearly: marketing that promises large, consistent returns from “arbitrage” should be treated skeptically, because genuine arbitrage margins have compressed significantly as more capital has entered the space competing for the same discrepancies. A retail product claiming to reliably capture large arbitrage profits, Bick argues, is often either describing a strategy that no longer works at meaningful scale, or isn’t actually performing arbitrage at all.

Perhaps the most useful insight in this chapter is Bick’s observation about why “arbitrage” specifically gets used by fraudulent operators: the term sounds technically sophisticated and low-risk — profiting from price differences rather than directional market bets — making it an effective label for funds that are, underneath, simply operating as unbacked Ponzi structures.

This chapter is a great example of how How Not to Get Scammed by AI Trading Apps teaches readers to think about terminology itself as a potential red flag. When a technical term is being used primarily to sound impressive rather than to accurately describe a verifiable strategy, that’s worth noticing.

Felix Bick’s treatment of arbitrage bots gives readers exactly the kind of specific, technically grounded skepticism needed to evaluate this particular category of trading product credibly.