Malicious actors stole roughly $9.9 billion from the crypto ecosystem last year — the lowest amount since 2021, according to a recent Chainalysis report.
As more fraudulent addresses are discovered, the firm expects that figure to increase to $12,4 billion.
The report also warned that AI fraud techniques, as well as the professionalism of the scam industry are driving illegal activity to an unprecedented level.
AI is a powerful tool for crypto fraud
The use of Generative Artificial Intelligence has significantly reduced the barriers to scammers. They can now create convincing synthetic identities, fake investments schemes and scams based on deepfake.
Reports revealed that 85 percent of frauds involved accounts which were verified and bypassed traditional methods for identity verification.
Elad Fuks, the head of Chainalysis’ fraud products, stated:
“GenAI is amplifying scams by making fraud more scalable, cost-effective, and harder to detect. It allows criminals to impersonate real users, generate fake content, and orchestrate elaborate investment scams.”
Huione Guarantee is an AI black-market platform that allows scams to be carried out by peer-to-peer. This platform provides illicit services, such as AI generated identities, deepfake technology and synthetic verification tools.
On-chain data shows a pattern where payments to Huione’s AI software vendors spike just days before major pig butchering scams see inflows. It is possible that the fraudsters are reinvesting their illicit profits into AI software to power future scams.
The rise in pig butchering
The most lucrative scams, HYIS (high-yielding investment schemes) and the pig butchering scheme, accounted for 50.2%, and 33.2%, of illicit crypto flow.
While investments in HYIS schemes declined 36.6% over the past year, pig slaughtering scams grew nearly 40%. These trends reflect a rising trend of investment and romance frauds that target unsuspecting targets. This operation, often originating in scam compounds across Southeast Asia, has expanded worldwide.
Scams like pig butchering are used to trick victims into investing their money in fake crypto schemes. They convince an unsuspecting victim to invest more and more with false promises. Then, they take the money.
Nigerian authorities detained 48 Chinese nationals and 40 Filipinos in December 2024 for a crypto-investment scam that targeted victims from Europe and America.
Interpol also disrupted scam networks around the world, including in Namibia where, in June 2024, 88 youths who were trafficked into cryptocurrency fraud had been forced to participate.
The scams have evolved
Further, the fraudsters’ methods have changed, from long-term scams of investment to short-term job scams wherein victims send crypto deposit disguised as fee.
Eric Heintz is a global analyst with International Justice Mission.
“These scams are particularly insidious because they prey on job seekers, especially those desperate for work.”
Huione expands its financial infrastructure as scammers perfect their tactics. The platform will launch a project on blockchain called Xone in 2024 and a stablecoin named USDH to evade regulation and prevent asset seizure.
Authorities have rushed to stop the fraud epidemic. While Interpol and financial watchdogs have intensified enforcement, the sophistication of scams — and their reliance on AI —suggests that traditional regulatory tools may be inadequate.
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