QuickTake:

• AI technology is increasingly being used by scammers in the crypto world.
• Elliptic’s recent report highlights five key ways AI is being exploited for illicit activities.
• Deepfakes, AI-scam tokens, and enhanced phishing methods are among the new threats.
• Increased awareness and understanding of these scams can help users protect themselves.

Artificial intelligence (AI) is revolutionizing various industries, and the cryptocurrency sector is no exception. While AI has the potential to drive significant innovation within crypto, it also poses new risks. A recent report by blockchain analytics firm Elliptic has highlighted the growing use of AI in perpetrating scams and frauds in the crypto space. The report underscores how AI is becoming a tool for threat actors to exploit, introducing a new layer of complexity to crypto security.

Elliptic’s report outlines five primary typologies where AI is being used for malicious purposes in the crypto industry. These typologies include creating and disseminating deepfakes, developing AI-scam tokens, using large language models to devise sophisticated hacks, spreading disinformation, and creating more convincing phishing websites and prompts to facilitate identity theft.

Deepfakes and Disinformation: Deepfakes are AI-generated videos or images that convincingly mimic real people, making them a powerful tool for scammers. These manipulated media can be used to deceive individuals into believing false narratives or trusting fraudulent schemes. For instance, a recent deepfake video of Elon Musk promoting a fake trading platform called Quantum AI circulated on social media, tricking numerous users into believing it was a legitimate endorsement.

AI-Scam Tokens: The creation of AI-scam tokens is another emerging threat. Scammers capitalize on the hype surrounding AI and cryptocurrency to create fraudulent tokens that promise high returns. These tokens often attract unsuspecting investors looking to cash in on the latest technological advancements, only to disappear with their investments.

Sophisticated Phishing Attacks: Phishing attacks have long been a threat in the digital world, but AI has taken them to a new level. AI can generate more convincing phishing websites and prompts, making it harder for individuals to distinguish between legitimate and fraudulent communications. These enhanced phishing methods facilitate identity theft and unauthorized access to users’ crypto wallets and accounts.

Use of Large Language Models for Hacking: Large language models, such as those developed by OpenAI and other tech companies, can be used to devise intricate hacking strategies. These models can analyze vast amounts of data to identify vulnerabilities in blockchain networks or crypto platforms, enabling hackers to execute more effective attacks.

Spreading Disinformation: AI also plays a role in spreading disinformation within the crypto community. False information about market trends, regulatory changes, or investment opportunities can be disseminated quickly and convincingly through AI-generated content. This disinformation can manipulate market sentiment and lead to significant financial losses for investors who act on false information.

Awareness of these AI-driven scams is crucial for crypto users to protect themselves. The new report from Elliptic aims to shed light on these emerging threats and encourage the crypto community to stay vigilant. By understanding the common types of crypto-related scams, users can better recognize and avoid potential threats.

Historical and Contemporary Context: Historically, the crypto industry has faced various types of scams, from Ponzi schemes and rug pulls to social media scams and “romance scams,” now often referred to as “pig butchering.” The introduction of AI has amplified the effectiveness of these traditional scams, making them more convincing and harder to detect.

The challenge in combating these AI-driven scams lies in their complexity and the speed at which AI technology evolves. Pete Pachal, a notable expert and author of the Media CoPilot Substack, recently highlighted the multifaceted nature of these scams. He pointed out that each type of scam presents unique variables and solutions, making it difficult to devise a one-size-fits-all approach to prevention and mitigation.

Deepfake Example: Pachal’s insights were particularly relevant during his talk at Consensus 2024, where he discussed the impact of deepfakes on truth and deception. He noted that AI image generation has improved to the point where deepfakes are increasingly difficult to identify. The fake video of Elon Musk promoting Quantum AI is a prime example of how convincing these deepfakes can be, leading to significant financial harm for those who fall victim to such scams.

Recommendations for Users: To stay ahead of these AI-driven scams, crypto users should take several precautionary measures:

• Stay Informed: Regularly update your knowledge about the latest scam techniques and trends in the crypto space.
• Verify Information: Always verify the authenticity of information, especially when it involves investment opportunities or endorsements from public figures.
• Use Security Tools: Employ robust security tools, such as multi-factor authentication and hardware wallets, to protect your assets.
• Be Skeptical: Maintain a healthy level of skepticism, particularly when confronted with offers that seem too good to be true or require urgent action.

Industry and Regulatory Response: The crypto industry and regulatory bodies also have a role to play in addressing these emerging threats. Increased collaboration between blockchain analytics firms, exchanges, and regulators can help identify and mitigate these scams more effectively. Additionally, advancements in AI detection tools can aid in spotting and removing deepfakes and other AI-generated fraudulent content from online platforms.

In conclusion, the rise of AI in the crypto world presents both opportunities and challenges. While AI has the potential to drive innovation, it also introduces new risks that must be addressed. Elliptic’s report serves as a crucial reminder of the importance of staying informed and vigilant in the face of evolving threats. By understanding and recognizing these AI-driven scams, crypto users can better protect themselves and their investments in an increasingly complex digital landscape.