How Financial Institutions Can Combat AI-Deepfake Fraud

Cryptocurrency, a form of digital-only money, has seen explosive growth, offering people quick fee-saving payment options and a high-risk, high-reward investment. Users can buy, sell, and transfer cryptocurrency. However, unlike traditional currency, cryptocurrency is not government-backed or insured, making it highly susceptible to value fluctuations and fraud. These factors, along with cryptocurrency’s unique decentralized nature, rapidly, have fueled a new wave of AI-powered scams that exploit these dynamics. In this blog, you’ll learn about cryptocurrency, common cryptocurrency scams, and how to protect yourself from these attacks.

What is Cryptocurrency?

Cryptocurrency is a form of digital currency that exists only in electronic form and can be bought through exchanges, apps, websites, or even cryptocurrency ATMs using a phone or computer. It was designed for quick payments, to avoid traditional bank transaction fees, or as an investment with the hope of future gains. Individuals can also earn cryptocurrency by "mining" it, a process that involves using advanced computers to solve complex mathematical puzzles. Once obtained, cryptocurrency is stored in a digital wallet, though this comes with a few risks. If you lose your password, send funds to the wrong person, or have your wallet compromised, recovering your assets can be challenging and it is unlikely that you’ll get your money back. Unlike the U.S. dollar, cryptocurrency isn’t backed or insured by any government, and its value is highly volatile, changing by the hour based on supply and demand. Bitcoin, which launched in 2008, was the first cryptocurrency and remains the largest, most influential, and best-known digital currency.

Common Cryptocurrency Scams that Leverage AI

As AI technology evolves, scammers are leveraging it to create sophisticated traps, luring people into fraudulent cryptocurrency scams. Here’s a breakdown of the main types of AI scams in the crypto space.

Deepfake Crypto Investment Scams

Using AI, scammers create highly realistic videos or images of well-known figures endorsing fake projects. For instance, the Noxdep Crypto Scam used deepfake videos of well-known cryptocurrency personalities to promote a fake investment, persuading victims to believe they were joining a legitimate venture. The AI manipulation added credibility, making it easier for scammers to siphon off funds from unsuspecting investors.

Voice-Cloning Scams

Voice-cloning technology replicates voices from as little as 3-10 seconds of audio. Scammers use this tech to impersonate family members or trusted figures in distress, often reaching out on social media or through voicemails. Victims are more inclined to believe and act on these urgent pleas, potentially sending crypto assets directly to scammers.

Phishing and Fake Websites

Phishing and fake website scams are common tactics in cryptocurrency fraud, targeting individuals to steal their digital assets by impersonating legitimate services. AI-generated phishing sites mimic legitimate crypto platforms, tricking users into sharing sensitive information like wallet keys or login credentials. AI-generated emails or chatbot interactions direct users to these fake sites that look nearly identical to the real ones, prompting victims to enter their login details, wallet keys, or other sensitive information. Once scammers gain access to this information, they quickly drain the victim’s digital wallet, leaving them without recourse.where their details are harvested. Once access to a wallet is gained, funds are almost impossible to recover.

Rug Pull Scams

A rug pull scam is a type of cryptocurrency fraud in which developers promote a new digital token, NFT, or crypto project with big promises, only to suddenly abandon it after collecting investors' money. Rug pulls usually target inexperienced or curious investors looking for high returns in new projects. A notorious example is the cryptocurrency Ponzi scheme OneCoin, where they raised $4 billion and defrauded people of billions of dollars by promising investors returns on their crypto investments and pitching the company as a legitimate business. OneCoin's founder Ruja Ignatova disappeared in October 2017 without a trace and is wanted by US authorities for fraud and conspiracy. AI can amplify these scams by creating an illusion of authenticity, such as exaggerated project followers or activity.

Romance Scams

In these scams, scammers develop long-term online relationships to build trust before introducing crypto investments, often promising quick profits or “exclusive” investment opportunities. Victims are persuaded to send money in the form of cryptocurrency, which is appealing to scammers because it’s hard to trace and, once sent, difficult to recover. AI helps scammers maintain realistic “relationships” using chatbots and social media personas to foster emotional connections, eventually convincing victims to invest in fake projects.

Protecting Yourself Against AI Crypto Scams

While scams are evolving, so are defense measures. Here are steps to keep your assets safe:

Verify Sources:

Verifying sources is crucial in the world of cryptocurrency, especially with the rise of AI-powered scams that can easily imitate trusted figures and platforms. In order to double-check authenticity, it’s important to go directly to the source, or the official website before investing. Many scams use fake announcements or impersonate accounts to create interest. If you’re seeing announcements of new and exciting crypto investment opportunities through social media, it’s important to follow the verified accounts. Many scammers will create accounts with minor spelling changes to impersonate major cryptocurrency platforms and their founders. It’s important to look for official announcements from credible platforms before sharing sensitive information.

Be Cautious with Links:

Cross-check URLs by examining the website address closely. Scammers will often send messages with links that look legitimate but redirect you to fake sites designed to steal information. It’s good practice to avoid clicking links from unknown senders, even if they appear to come from a trusted source. It’s good practice to also type the URL manually or use bookmarked links to access trusted platforms. By typing the URL directly into your browser, it minimizes the risk of landing on a spoofed site. Similarly, if you frequently visit certain sites, like crypto exchanges and your digital wallet, bookmark those links into your browser. This way you will be able to know if you’re visiting the correct URL without risk from mistyped URLs or fake links.

Use Strong Security Measures:

It’s always best practice to have solid security measures in place to ensure your information is safe, such as enabling multi-factor authentication (MFA) for your accounts. With MFA, typically a code is sent to your phone or an authenticator app for additional verification beyond your password. Hardware tokens such as Yubikey is another way to protect your sensitive data. These devices generate a unique code when inserted into your computer, providing an extra layer of security as they are extremely hard for scammers to clone or bypass. Having a Virtual Private Network (VPN) can also protect sensitive information. VPNs encrypt your internet traffic, making it difficult for hackers to intercept data such as login credentials, on public Wi-Fi. When using a VPN, sensitive actions such as logging into your crypto account or making transactions become much safer, as it hides your IP address and encrypts your data.

Continuously Watch For Voice Scams

In the rapidly evolving world of cryptocurrency, staying secure requires vigilance and proactive measures. Scammers use sophisticated tactics, including AI-driven deepfakes, voice cloning, phishing sites, and fake endorsements to lure investors into traps. Voice Cloning particularly has become an easy route for hackers to gain trust with a user within minutes. With the help of AI, a hacker can impersonate a trusted voice or mimic tone in order to deceive a user into giving away crypto currency. Dive deeper into vishing to understand the risks of voice specific scams.