Quick Take:

• Hong Kong’s Securities and Futures Commission (SFC) warns of fraudulent platform Quantum AI using Elon Musk deepfakes.
• AI-related scams are rising, with fintech fraud in Hong Kong up 3.8% in Q1.
• Asia-Pacific region sees a 1,530% surge in deepfake incidents, especially in Vietnam and Japan.

Last week, the Hong Kong Securities and Futures Commission (SFC) issued a public warning about a fraudulent cryptocurrency trading platform called “Quantum AI,” which has been using deepfake videos of Elon Musk to deceive investors. While this scam is not new, it underscores a significant rise in AI-related fraud, a trend to which Hong Kong and the broader Asia-Pacific region are particularly vulnerable.

On May 8, the SFC alerted the public to the scam, noting that Quantum AI promises unrealistically high returns. The regulator has urged the Hong Kong Police Force to block access to the associated websites and social media pages. As of this week, the related domains and Facebook groups have been taken down.

Hong Kong has already experienced several deepfake-related fraud incidents, prompting heightened vigilance from authorities. According to a report by identity verification platform Sumsub, deepfake incidents in the Asia-Pacific region surged by 1,530% last year, with Vietnam and Japan witnessing the highest number of attacks.

Penny Chai, Vice-President of Business Development for APAC at Sumsub, explained the increased risk: “The emerging Asia market’s high volume of digital financial transactions creates a larger target pool for deepfake scams. The region, particularly Hong Kong, facilitates numerous instant cross-border transactions, which deepfake scammers can exploit due to the complexity and volume of financial dealings.”

The Quantum AI scam has been around for at least a year, continually evolving to target different groups with new variations. One notable instance was a video circulated on Facebook last year, featuring a deepfake of Elon Musk, the CEO of Tesla and SpaceX, and Jack Ma, co-founder of Alibaba Group Holding. This video, debunked by PolitiFact, was edited from a real interaction between Musk and Ma at the 2019 World AI Conference in Shanghai. Another video used for the scam was modified from Musk’s appearance on Fox News with conservative pundit Tucker Carlson, as verified by Reuters Fact Check.

Many of the fraudulent websites using the Quantum AI scheme rely on inexpensive hosting providers and flexible back-end technologies like WordPress. One of the top search results for Quantum AI includes a website requiring a minimum deposit of $250, accompanied by a disclaimer advising users to “invest only what you’re okay with losing completely.”

The surge in deepfake scams can be attributed to several factors. Firstly, the increasing sophistication of AI technology makes it easier for scammers to create highly convincing fake videos. Secondly, the rapid growth of digital financial transactions, especially in emerging markets like Asia, provides scammers with a vast pool of potential targets. The anonymity and speed of these transactions also make it difficult to trace and recover lost funds.

In response to the growing threat, the SFC and other regulatory bodies are working to enhance their monitoring and enforcement capabilities. They are collaborating with tech companies and financial institutions to develop better detection and prevention tools. Public awareness campaigns are also being launched to educate investors about the risks of deepfake scams and how to protect themselves.

Investors are advised to exercise extreme caution when dealing with online trading platforms, especially those promising high returns with little risk. It is essential to verify the legitimacy of the platform and its operators before making any investments. Using established and regulated platforms can provide an added layer of security.

The rise in AI-related fraud highlights the need for a proactive approach to cybersecurity in the financial sector. As technology continues to evolve, so do the tactics of scammers. Ensuring the safety of digital transactions will require ongoing vigilance, collaboration, and innovation from all stakeholders involved.

In conclusion, the recent Quantum AI scam serves as a stark reminder of the risks posed by AI-related fraud, particularly in regions with high volumes of digital financial transactions like Hong Kong. Authorities and investors must remain vigilant and take proactive measures to protect against these sophisticated scams.