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article imageOp-Ed: First Fintech AI lawsuit, big legal liabilities issues

By Paul Wallis     May 8, 2019 in Technology
London - OK, so who do you sue when your auto trading AI loses you millions of dollars? That’s not at all clear, and it’s turning in to a major risk issue. It’s incredibly complex, and establishing liability isn’t easy.
The finance sector is expecting big things out of AI, and this case will test the absolute fundamentals of purchasing and using artificial intelligence.. A classic case currently in the spotlight is the case of an investment fund salesman call Samathur Li Kin-kan in London who has lost $20 million thanks to auto trading.
The legal problems include:
• Buying an algorithmic AI service called K1 which includes functions like predicting market sentiment, futures markets price moves, and other extremely complex investment issues.
• Absolute lack of clarity on the nature of any legal liabilities devolving on the vendor of these systems.
• The $20 million was lost in a single day, adding focus on specific transactions and related functions conducted by the K1 system.
Samathur Li Kin-kan is now selling the vendor, Tyndaris Investments, for misrepresentation on the basis of exaggeration of the capabilities of the K1 system. Of course, it's not that simple.
Proof of liability for anything, let alone artificial intelligence operations, is never easy. This lawsuit could devolve on a whole range of issues, including misrepresentation, (Tyndaris denies any misrepresentation and our counter-suing for unpaid fees) faulty software, and a host of other issues. The question is exactly who was liable for these problems, and to what extent.
Artificial intelligence and future law
Artificial intelligence is becoming huge in the financial sector. This lawsuit may be a defining moment for investors around the world. The law is usually way behind any new technology. The Internet is a case in point, where liabilities, jurisdictions, and other issues crash into each other with monotonous regularity. With technology, the human factor is generally the liable party.
With artificial intelligence, however, there is a further issue – An artificial intelligence is not a legal entity. It can't be sued, so liabilities may devolve on anyone involved, from software developers to vendors. The fact that the software developers and vendors may have no control over the artificial intelligence functions and any action it takes is a critical point.
The simple question is whether or not it is reasonable to assume that these parties have any direct involvement when things go wrong. This court case may create a whole lot of legal precedents. This is the first time artificial intelligence and the law have met in court, so anything could happen.
This is an extremely important case, and perhaps the first in the world to actually test the law in relation to artificial intelligence. Artificial intelligence will be up and running around the world seen enough. There will be literally millions, probably billions, of different AI entities. Exactly how the law intends to deal with the overall legal problems of artificial intelligence will be interesting to see.
Basic commercial law versus AI
One of the more likely scenario is that artificial intelligence will be categorised as a product, and product law is relatively straightforward. Products are supposed to be fit for the purpose for which they are purchased, with clearly laid out liabilities.
That still doesn't quite address the issue of malfunctions of artificial intelligence. Artificial intelligence is to some degree autonomous, working independently. Artificial intelligence also learns as it works, generating any amount of new legal factors when it comes to artificial intelligence failures.
The bottom line here is that lack of effective law to cover artificial intelligence is going to cause real problems on a global scale. Unless adequate legislation and proper judicial oversight are applied, chaos is the most likely result.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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