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AI is accelerating fraud and influencer scams on crypto websites.

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Artificial Intelligence (AI) has been integrated early into the world of cryptocurrency, offering opportunities for efficiency as well as creating the potential for scams. According to a recent report by Elliptic, AI is being utilized by scammers to accelerate and expand their cyclical crypto scams. While AI has numerous legitimate use cases that can benefit crypto ventures, it also opens up new avenues for illicit activities that can harm the credibility of both AI and the crypto industry.

Scams involving social media influencers and crypto websites are becoming increasingly prevalent. Influencers who use their following to promote specific crypto products can manipulate prices through tactics such as the “pump and dump” scheme. Additionally, influencers can spread false information to incite fear and panic selling in the market before buying cryptocurrencies at lower prices. Similarly, crypto scammers operate cyclically by creating scam investments, airdrops, and giveaway sites that gain traction before executing a “rug pull” and disappearing with victims’ funds.

Creating scam documents such as social media accounts and websites is resource-intensive and time-consuming. However, AI tools can streamline this process by generating fake employee images and other marketing materials to make scams appear more legitimate and professional. This not only saves time but also enhances the sophistication of the scams, making them more difficult to detect. By automating and streamlining social media posts, scammers can connect with a larger number of people and execute their operations more efficiently.

Examples of scams involving AI in crypto include a Reddit user who was scammed by an AI-powered bot named Jessica promising significant returns through crypto trading. Another example is NovaDrainer, a crypto affiliate platform that uses AI for creating scam investment sites. Despite promoting legitimate projects, NovaDrainer openly markets its services for phishing and draining victims’ crypto. The platform has received thousands of crypto tokens from scam victims and employs a complex strategy to manage stolen funds.

To address these challenges, proactive measures are needed. The crypto industry must invest in advanced security measures and collaborate with AI developers to create technologies capable of detecting and countering scams. Raising awareness among users about potential risks and educating them on identifying and avoiding scams is crucial. The elliptic report recommends using the DECODE framework, which stands for detect, educate, cooperate, defend, and enforce, to mitigate emerging crime trends in AI-enhanced crypto crime. This framework includes using blockchain analytics and AI-enhanced blockchain analytics to detect and prevent crime, raising awareness among users, sharing data and best practices, ensuring that new technologies are crime-proofed during development, and prioritizing interventions against illicit services experimenting with AI.

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