AI accelerates crypto website fraud and influencer scams

AI’s early integration into crypto presents opportunities for efficiency, as well as scams. According to an Elliptical report, AI is helping scammers speed up and increase their cyclical crypto scams.

We’ve all heard of AI by now, and its many use cases. Some use cases are legitimate and useful for crypto businesses, while others allow bad actors and scammers to prey on victims. AI can enhance the legitimate crypto businesses by generating text, images, websites, videos and other content. It also opens new avenues for illegal activities.

According to a recent Elliptic report, AI could accelerate the deployment and sustainability of crypto scams, posing a significant threat to the credibility of Artificial Intelligence and the crypto industry.

Scams involving social media influencers and crypto sites

Crypto influencers who use their following and personality to push specific crypto products can use their influence to manipulate prices in various ways. Influencers often use a tactic known as “pump and dump,” in which they promote a particular cryptocurrency to artificially increase its price. Influencers encourage followers to invest, driving up the price. They then sell, driving it down, and profit at the expense of their followers.

Influencers can use their platforms to spread exaggerated or false claims, causing fear and panic selling in the market. Then they can buy cryptocurrencies at lower prices.

Like influencers, crypto scammers operate cyclically. They create scam investments, airdrops or giveaway sites that are widely promoted on social media and messaging apps. Once these sites gain enough traction and controversy, scammers perform a “retreat,” disappearing with the victims’ funds and leaving them empty-handed. The process is cyclical, so after the carpet pull they often start again with a new sign, a different website and new marketing strategies.

Creating all these scam documents – from social media accounts to websites and user interfaces – is time-consuming, resource-intensive and expensive. AI tools can now significantly streamline this process.

According to the Elliptic report, for example, AI can generate fake employee images and other marketing materials, making scams look more legitimate and professional. This not only saves time, but also increases the sophistication of the scams, making them more difficult to detect.

To make as much money as possible, scammers need to establish scam operations and connect with a large number of people. Typically, they used social media bots to spread fake marketing and messages on a large scale. However, with AI, scammers can automate and streamline social media posts and set up the required infrastructure for their efficient distribution, taking this approach to the next level.

Scam examples

Per one Reddit user, a person named Jessica, believed to be an AI-powered bot, claimed to be offering huge returns through AI-powered crypto trading after the user clicked on an investment ad. After a series of requests for raising Ethereum (ETH) under the guise of fees and investments, the user gave Jessica more than $1300. The bot promised returns of over $6000 but never returned the winnings. Jessica disappeared after receiving a final payment.

Another example involves NovaDrainer, a crypto affiliate platform based in Canada and the United Kingdom that offers a scam-as-a-service that creates crypto investment sites for affiliates, who split the proceeds. It claims to use AI for sign processing and generating SEO optimized website designs. Despite promoting legitimate projects, it openly markets its use for phishing and draining victims’ crypto.

Over the past year, the platform has received 2,400 variants of crypto tokens from more than 10,000 wallets, likely scam victims. Elliptic’s analysis reveals that NovaDrainer uses a complex cross-chain embezzlement strategy involving decentralized exchanges, cross-chain bridges, and coin exchange services to manage the stolen funds. However, the transactions are not automated by AI.

Precautions and regulations

Meeting these challenges requires a proactive approach. The crypto industry needs to invest in advanced security measures and collaborate with AI developers to create technologies capable of detecting and countering scams. Additionally, it is essential to make crypto users aware of the potential risks and educate them on identifying and avoiding scams.

The elliptical report recommends that the DECODE (detect, educate, cooperate, defend, enforce) framework be used to mitigate emerging crime trends.

Detect

Use blockchain analytics to identify payments to AI-related illegal services Use AI-enhanced blockchain analytics to detect crime

Educate

Raise awareness among users of crypto and AI about both existing and recent red flag indicators of scams Educate users and employees on methods to identify deep counterfeits

Work together

Data sharing to expand the capabilities of relevant stakeholders to mitigate AI-enhanced cryptocrime Share best practices between stakeholders

Defend

Ensure new AI and crypto technologies are crime proof during development Equip compliance teams

Enforce

Prioritize interventions against illegal services experimenting with AI Ensure that new and rapid innovations in AI are integrated with capacity building and training