Losses from cryptocurrency scams are on track to hit record levels in 2024 after scammers have increasingly used generative AI to trick victims.
Cryptocurrency scams are likely to cause more than $12.42 billion in losses in 2024, up from more than $11.89 billion in 2023, according to research by Chainalysis.
There have been at least more than $9.9 billion in confirmed losses from cryptocurrency scams in 2024, but that number is expected to go up as more data is analyzed, Chainalysis said.
“Large-scale scam operations are buoyed by an entire ecosystem that has emerged to facilitate fraud operations,” said Jacqueline Burns Koven, head of cyber threat intelligence at Chainalysis, an interview with ConsumerAffairs.
Chainalysis said the most common types of scams are high-yield investment scams and so-called pig-butchering scams, accounting for around 50% and 30% of losses in 2024, respectively.
In cryptocurrency, high-yield investment scams are essentially Ponzi schemes that often rely on investors recruiting more investors, according to the California Department of Financial Protection and Innovation.
Scammers promising returns may advertise the scams on YouTube or other social channels and then get people to invest on a website through a cryptocurrency wallet, but it only a matter of time until these scams collapse and leave victims in their wake, DPFI said.
Pig-butchering scams, named after fattening a pig before slaughter, lure victims into making increasingly large contributions of cryptocurrency before the scammer vanishes, according to the Federal Deposit Insurance Corporation.
There was a 39% increase in losses from pig-butchering cryptocurrency scams in 2024 from 2023, Chainalysis said.
“The professionalization of the fraud supply chain over the years has certainly fueled the revenue increase for pig-butchering scams in particular,” Burns Koven said.
What is driving cryptocurrency scams?
AI and social media media management are cheap and easily available for cryptocurrency scammers to use, Burns Koven said.
“Technologies have made fraud cheaper, more convincing and easier to scale,” she said.
In particular, Burns Koven said scammers are using generative AI to create fake identifies, bypass identify verifaction and build deceptive websites and content.
“With the help of generative AI, scams become more convincing and harder to detect,” she said.
Email Dieter Holger at dholger@consumeraffairs.com.