Dubai: Cryptocurrency scams are nothing new and fraudsters are always finding new ways to dupe investors. With the recent boom in artificial intelligence (AI), fraudsters have started using the trendy technology in some unique ways to steal cryptocurrencies.
According to a new report from global blockchain analytics platform Elliptic, this includes the use of “deepfakes” – AI-generated fake images and videos of people – as well as promoting popular AI-related buzzwords, all with the aim of advertising their products and tricking potential victims into investing in them.
“Investors and new buyers tend to trust cryptocurrencies that have a larger and more loyal following online, and assume others have done sufficient research before investing. However, the use of AI could call this assumption into question,” said Akbar Kalbeck, a Dubai-based cryptocurrency analyst.
“The use of deepfakes of major crypto influencers and celebrities such as Elon Musk, world leaders and even crypto exchange employees in their promotions, along with the use of industry-specific buzzwords such as GPT to promote questionable crypto tokens, creates a false sense of trust among users to encourage them to spend their money.”
Additionally, a search for the keywords “ChatGPT” or “OpenAI” on DEXTools, a crypto trading platform that tracks tokens, reveals that over 700 tokens mention either of the two keywords, indicating that scammers are capitalizing on the hype around AI tools to create tokens given that OpenAI has yet to enter the crypto space.
“Right now, just because there are thousands of likes or comments that look real doesn't necessarily mean it's a legitimate project. This is just one attack vector, and AI will create many others. That's why it's more important than ever to know how to protect your investment,” Kulbeck added.
Fraudsters target crypto users' digital wallets through unique AI scam
According to several other reports and studies, many of the attacks targeting cryptocurrencies are “social engineering” attacks – a manipulation tactic where a user is asked to visit a website, the website asks the user to connect their wallet, and a transaction pops up – if the crypto user accepts it, the money is gone.
Kulbeck agreed that crypto scammers still rely on “social engineering” — in this case, getting crypto users to reveal their private keys. Other attacks only require knowing a crypto user's wallet address, and that's often the only way to steal cryptocurrency.
How do you spot a cryptocurrency scam before it happens?
There are warning signs to look out for when deciding whether or not you should pursue a particular cryptocurrency investment plan, and you should protect your investment from becoming a target for a scam.
1. When there is no white paper for a cryptocurrency
Every cryptocurrency needs a whitepaper because it's one of the most important aspects of an Initial Coin Offering, a form of crowdfunding to raise funds for a new cryptocurrency venture.
“The white paper needs to explain how the cryptocurrency is designed and how it will function. If the white paper doesn't make sense, or even worse, there isn't one, then you should tread with caution,” said Brody Dunn, an investment manager at a UAE-based asset advisory firm.
2. Lack of background information on cryptocurrencies
With most investment businesses, you should be able to find out who the key people behind it are, and usually this means that the bios of the people running it are easy to find and they are active on social media.
“If you don't know who is operating the cryptocurrency, be careful. Also, remember that investments can go up and down, so no investment can guarantee a future profit. Any cryptocurrency that promises guaranteed profits is a red flag,” Dan added.
There are over 420 million cryptocurrency users worldwide, and cryptocurrency wallets are becoming increasingly popular among crypto enthusiasts to safely store their private keys.
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How can you protect your cryptocurrency wallet from scammers?
With over 420 million cryptocurrency users worldwide, cryptocurrency wallets are becoming increasingly popular among crypto enthusiasts to safely store their private keys. But how do you safely store your cryptocurrencies within a wallet?
“If a company asks you to share your keys to participate in an investment opportunity, it's likely a scam,” warns Kalbeck. “Keep your wallet keys secret, and scammers often use high-pressure tactics to get you to invest your money quickly.”
“The idea is to reach as many people as possible in as short a time as possible by promising discounts if you join right away, in order to raise funds quickly. If you feel the marketing for a cryptocurrency offering seems pushy or makes unsubstantiated claims, investigate further.”
While the best way to protect yourself from cryptocurrency attacks is to be aware of the risks and take measures to secure your wallet, there are some simple tips that can help you stay safe when trading cryptocurrencies.
1. Use a secure wallet: Protect yourself from such attacks by using a secure, encrypted wallet. Hardware wallets are the most secure as they store your private keys offline.
2. Do not share your wallet address: Avoid sharing your wallet address with anyone, as this could make you an investor a victim of fraudulent cryptocurrency transactions.
3. Use two-factor authentication. Setting up two-factor authentication on your wallet will make it harder for hackers to access your funds, even if they do manage to do so.
The conclusion?
On a more positive note, AI has the potential to automate aspects of cryptocurrency development and could act as a great tool for those using the technology to run cryptocurrencies. However, there is a risk that it could be used as a tool to scam investors, so cryptocurrencies need to be kept safe.
“Hackers and scammers are becoming increasingly sophisticated, so it's important to always pay close attention to the addresses your wallet interacts with. Ideally, your wallet should have built-in security features such as two-factor authentication, and many do, so use one that does,” Dan added.
“Being aware of these new (or, let's be honest, old, now strengthened) scams can help users stay ahead of the curve. This means that crypto users need to be more educated about the most common types of crypto-related scams.”
Kalbeck added that certain crypto software is also starting to use AI to combat hacking attacks, using detection bots and machine learning models to monitor transactions in real time and look for specific red flags in new cryptocurrency algorithms.
Both experts also recommended that novice crypto investors should make use of offline crypto storage, as it is widely regarded as the safest option and is used by both individuals and trading platforms to safeguard their digital assets.
