In an unsettling development for the cryptocurrency industry, a recent Elliptic report reveals that artificial intelligence (AI) is being leveraged by scammers to accelerate and amplify fraudulent activities. While AI holds the potential to enhance efficiency and innovation in the crypto space, its misuse by bad actors is raising significant concerns.
AI’s versatile capabilities in generating text, images, websites, and videos can streamline operations for legitimate crypto companies. However, these same capabilities are being exploited to create sophisticated scams that deceive investors. The report underscores that AI is enabling scammers to launch and sustain crypto frauds more efficiently, posing a serious threat to both AI’s credibility and the integrity of the cryptocurrency sector.
Crypto influencers, who often have substantial followings, are one of the primary groups misusing AI for nefarious purposes. By promoting specific crypto products, influencers can manipulate market prices through tactics such as “pump and dump” schemes. In these schemes, influencers hype a cryptocurrency to artificially inflate its price, encouraging followers to invest. Once the price peaks, the influencers sell off their holdings, causing the price to crash and leaving their followers with significant losses.
Furthermore, influencers can disseminate exaggerated or false claims to induce fear and panic selling among investors. This allows them to buy cryptocurrencies at deflated prices, further profiting from market manipulation.
Crypto scammers, like influencers, operate in cyclical patterns. They create fraudulent investment opportunities, airdrops, or giveaway websites that gain traction through social media and messaging apps. Once they attract enough attention, these scammers execute a “rug pull,” absconding with the victims’ funds. They then reappear with new tokens, websites, and marketing strategies, perpetuating the cycle.
The creation of scam documents and platforms, which traditionally requires considerable time, resources, and costs, is now being expedited by AI tools. According to Elliptic, AI can produce fake employee images and other marketing materials, enhancing the appearance of legitimacy and professionalism in scams. This not only saves time but also makes scams harder to detect due to their increased sophistication.
Scammers aim to maximize their reach and profits by connecting with a vast audience. Previously, they relied on social media bots to disseminate fake marketing messages. Now, with AI, they can automate and streamline social media posts, creating a more efficient distribution infrastructure. This advancement takes their deceptive practices to a new level.
One Reddit user shared a troubling encounter with an AI-powered bot named Jessica, who promised substantial returns through AI-powered crypto trading. After responding to an investment ad, the user was persuaded to send over $1300 in Ethereum (ETH) under the pretense of fees and investments. Jessica, however, disappeared after receiving the funds, leaving the user without the promised returns.
In another alarming case, NovaDrainer, a crypto affiliate platform operating in Canada and the UK, offers a “scam-as-a-service” model. This platform creates fraudulent crypto investment sites for affiliates, sharing the proceeds. It utilizes AI to process tokens and design SEO-optimized websites, while also promoting its use for phishing and draining victims’ crypto assets. Over the past year, NovaDrainer has reportedly collected 2,400 variants of crypto tokens from more than 10,000 wallets, believed to be from scam victims. Elliptic’s analysis indicates that NovaDrainer employs a complex cross-chain obfuscation strategy involving decentralized exchanges, cross-chain bridges, and coin swap services to manage the stolen funds.
Addressing these growing threats requires a concerted effort from the crypto industry. Investing in advanced security measures and collaborating with AI developers to create technologies that can detect and counter scams is imperative. Only through proactive strategies can the industry hope to mitigate the risks posed by AI-enhanced crypto frauds.