AI Accelerates Fraud on Cryptocurrency Websites and Influencer Scams

• AI can accelerate the implementation and longevity of crypto website fraud and influencer scams.

The initial incorporation of AI into the crypto sector offers prospects for enhanced efficiency, alongside the potential for scams. According to an Elliptic report, AI is enabling fraudsters to expedite and amplify their recurring crypto scams.

AI has become widely recognized, showcasing numerous applications. While some applications are legitimate and beneficial for crypto enterprises, others facilitate malicious actors and scammers to exploit victims.

AI can bolster legitimate crypto businesses by producing text, images, websites, videos, and various other content. However, it also paves the way for unlawful activities.

A recent report from Elliptic indicates that AI can hasten the establishment and persistence of crypto scams, representing a significant risk to the integrity of both Artificial Intelligence and the cryptocurrency sector.

Scams Involving Social Media Influencers And Crypto Websites

Crypto influencers who utilize their audience and persona to promote specific crypto products can leverage their influence to manipulate prices in multiple ways.

Influencers frequently employ a strategy known as “pump and dump,” where they advocate for a specific cryptocurrency to artificially inflate its price. They encourage their followers to invest, resulting in a price surge.

Subsequently, they sell their holdings, leading to a price drop, profiting at the expense of their followers.

Influencers can also utilize their platforms to disseminate exaggerated or misleading claims, inciting fear and panic selling within the market. This allows them to acquire cryptocurrencies at reduced prices.

Similar to influencers, crypto scammers operate in cycles. They create fraudulent investment opportunities, airdrops, or giveaway websites that are heavily promoted on social media and messaging platforms.

Once these sites gain sufficient traction and notoriety, scammers execute a “rug pull,” vanishing with the victims’ funds and leaving them with nothing.

This cycle continues, as after a rug pull, they often initiate a new scheme with a different token, website, and marketing tactics.

Producing all these fraudulent materials—from social media profiles to websites and user interfaces—requires considerable time, resources, and expense. AI tools can now greatly simplify this process.

For example, according to the Elliptic report, AI can create fake employee images and other promotional content, enhancing the appearance of legitimacy and professionalism in scams.

This not only conserves time but also increases the complexity of the scams, making them more challenging to identify.

To maximize their profits, scammers must establish operations and connect with a broad audience.

Traditionally, they have relied on social media bots to disseminate false marketing and messages on a large scale.

However, with AI, scammers can automate and optimize social media postings and establish the necessary infrastructure for efficient distribution, elevating this method to a new level.

Scam Examples

According to a Reddit user, an individual named Jessica, likely an AI-driven bot, claimed to provide substantial returns through AI-based crypto trading after the user clicked on an investment advertisement.

Following a series of requests for increasing Ethereum (ETH) under the pretense of fees and investments, the user transferred over $1300 to Jessica.

The bot promised returns exceeding $6000 but failed to deliver any profits. Jessica vanished after receiving a final payment.

Another instance involves NovaDrainer, a crypto affiliate platform operating in Canada and the UK that offers a scam-as-a-service, creating crypto investment sites for affiliates and sharing the profits.

It asserts that it utilizes AI for token processing and generating SEO-optimized website designs. Despite promoting legitimate projects, it openly advertises its capabilities for phishing and draining victims’ crypto.

In the past year, the platform has received 2,400 variations of crypto tokens from over 10,000 wallets, likely belonging to scam victims.

Elliptic’s analysis indicates that NovaDrainer employs a sophisticated cross-chain obfuscation strategy involving decentralized exchanges, cross-chain bridges, and coin swap services to manage the misappropriated funds. However, the transactions are not automated through AI.

Prevention Measures And Regulations

Tackling these issues necessitates a proactive strategy.

The crypto industry must invest in advanced security measures and collaborate with AI developers to create technologies capable of detecting and countering scams.

Furthermore, it is essential to raise awareness among crypto users regarding potential risks and educate them on how to identify and avoid scams.

The Elliptic report suggests employing the DECODE (detect, educate, cooperate, defend, enforce) framework to mitigate emerging crime trends.

Detect

• Utilize blockchain analytics to identify payments to AI-related illicit services
• Employ AI-enhanced blockchain analytics to detect criminal activities

Educate

• Increase awareness among crypto and AI users about both existing and recent indicators of scams
• Educate users and employees on how to recognize deep fakes

Cooperate

• Facilitate data sharing to enhance the capabilities of relevant stakeholders in combating AI-enhanced crypto crime
• Share best practices among stakeholders

Defend

• Ensure that new AI and crypto technologies are designed to be resistant to crime during development
• Equip compliance teams

Enforce

• Prioritize interventions against illicit services utilizing AI
• Ensure that new and rapidly evolving innovations in AI are integrated with capacity building and training