AI-Powered Crypto Scams Set New Records in 2024, Chainalysis Reports

Crypto scams likely set new record in 2024 helped by AI, Chainalysis says

Feb 14 (Reuters) - The rise of "pig butchering" scams and the increasing use of generative artificial intelligence likely lifted revenues from crypto scams to a record high in 2024, according to blockchain analytics firm Chainalysis. Revenue from pig butchering scams, where perpetrators cultivate relationships with individuals and convince them to participate in fraudulent schemes, increased nearly 40% in 2024 from the previous year, the firm estimated in a report published on Thursday. Revenue in 2024 from crypto scams was at least $9.9 billion, although the figure could rise to a record high of $12.4 billion once more data becomes available, it said. "Crypto fraud and scams have continued to increase in sophistication," Chainalysis researchers said. The company pointed to marketplaces that support pig butchering operations and the use of GenAI as factors making it easier and cheaper for scammers to expand operations. Indeed, GenAI technology could potentially "exponentially scale crypto scams", Chainalysis said. The company, which tracks publicly available transaction data on the blockchain to identify scam revenue, said crypto fraud activity grew 24% each year on average since 2020. Cryptocurrencies, most notably bitcoin, have soared in price and popularity over the past few years as investors chased banner returns and interest in blockchain technology soared. The sector has jumped significantly since U.S. President Donald Trump's victory in the November election on hopes of an easier regulatory environment. Other particularly lucrative scams included crypto drainers, where scammers pose as blockchain projects and take control of victims' crypto wallets, and high-yield investment scams that promised outsized returns, according to Chainalysis. In January 2024, a crypto drainer posed as the U.S. Securities and Exchange Commission after the regulator's X account was compromised. Cryptocurrency ATMs have also been key hotspots for scams, according to Chainalysis, with perpetrators often impersonating government officials or customer support agents to convince victims to deposit cash into the machines. Reporting by Lisa Mattackal in Bengaluru; Editing by Pooja Desai Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Boards, Policy & RegulationRegulatory Oversight

Crypto scams likely hit a new record in 2024, driven by 'pig butchering' and AI, says Chainalysis

Chainalysis said that crypto wallets linked to scams received $9.9 billion in cryptocurrency in 2024, according to its initial estimates Crypto fraud revenue is estimated to have hit record levels last year amid a surge in so-called romance scams as cybercriminals leverage artificial intelligence and become more organized, blockchain research firm Chainalysis warns. In a report released Thursday, the firm said that crypto wallets linked to scams received $9.9 billion in cryptocurrency in 2024, according to its initial estimates. It predicts 2024's figure to grow to a record of $12.4 billion as Chainalysis identifies more scam wallets. Chainalysis added that its yearly estimates of scam activity have risen by an average of 24% between annual reporting periods since 2020. According to its 2024 report, a leading reason for the uptick in scam revenue was an increase in the prevalence of romance scams, commonly known as "pig butchering." Pig butchering is a type of investing or romance scam in which a fraudster builds relationships with victims via social media or dating apps, intending to con them out of money through a sham investment opportunity. The name "pig butchering" comes from the idea that scammers must first "fatten up" the victims with flattery and fabricated bonds before "butchering," or stealing their money.

Crypto scams set for biggest year ever due to AI: Chainalysis

Crypto scams could have their biggest year yet in 2025, fuelled by the growth of artificial intelligence and professional scamming support services as the fraud industry gets more sophisticated. Blockchain analytics firm Chainalysis said in its Feb. 13 Crypto Scam Revenue 2024 report that generative AI is making "scams more scalable and affordable for bad actors to conduct." "GenAI is amplifying scams, the leading threat to financial institutions, by enabling high-fidelity, low-cost, and highly scalable fraud that exploits human vulnerabilities," said Elad Fouks, Chainalysis' head of fraud products. "It facilitates the creation of synthetic and fake identities, allowing fraudsters to impersonate real users and bypass identity verification controls," he added. Chainalysis found that crypto scam revenue reached around $9.9 billion in 2024, led by pig butchering scams. It expects the figure to likely increase to over $12 billion as it identifies more addresses associated with fraud and scams. Using its new fraud detector that it acquired last month for a reported $150 million, Chainalysis said it found that 85% of scams involve fully verified accounts that bypass traditional identity-based solutions, which Fouks said is made worse with AI. "GenAI enables the generation of realistic fake content, including websites and listings, to power investment scams, purchase scams, and more, making these attacks more convincing and harder to detect," Fouks said. Deloitte's Center for Financial Services estimates that generative AI and deepfakes will cost the US economy $40 billion by 2027. Chainalysis said crypto fraud and scams have continued to increase in sophistication, with operations like Huione Guarantee, a peer-to-peer (P2P) marketplace that offers legitimate services but also a host of illicit services that support scamming operations. "When comparing crypto flows from 2021 through 2024 based on a compound annual growth rate, Huione scam infrastructure providers' revenue has increased exponentially," the analytics firm said. In particular, AI service vendors' revenue grew by 1,900% -- "indicating an explosion in the use of AI technology to facilitate scams," it added. The US Federal Bureau of Investigation sounded the alarm over scammers using generative AI to target cryptocurrency investments last December. Related: Ransomware losses down 35% year-over-year: Chainalysis Chainalysis says its annual estimates of scam activity have grown by an average of 24% between yearly reporting periods since 2020. The firm expects to find the total losses from scams to be even higher after considering AI-powered scams. In a January report, the firm estimated that total Illicit crypto volumes may have reached as much as $51 billion in 2024, even though the share of illicit crypto use compared to the entire market has fallen to the lowest level in three years.