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The Rise of AI-Powered Synthetic Fraud

Levin Law | 5.2.2024

The world of finance is constantly evolving, and unfortunately, so are the tactics of criminals. While traditional fraud attempts might raise red flags for seasoned investors, a new breed of sophisticated scams is emerging– synthetic fraud powered by Artificial Intelligence (AI).

How to Protect Your Crypto and Other Assets

You are an informed investor. You understand the value of protecting your assets. You wouldn't fall for a basic phishing scheme, but staying ahead of the curve when it comes to advanced fraud tactics is crucial. So, let's delve into the world of AI-powered synthetic fraud and explore how you can safeguard your crypto, bitcoin, and other valuable holdings.

Common Kinds of Synthetic Fraud 

The decentralized nature of cryptocurrency transactions makes them a tempting target for fraudsters. Synthetic fraud, empowered by AI, poses a significant threat as it allows criminals to bypass traditional safeguards. By understanding these tactics, you can be more vigilant and take steps to protect your assets. Here are some prevalent tactics used in the crypto space to watch out for.

Account Takeover with Synthetic Identities

Criminals can leverage synthetic identities to create fake accounts on cryptocurrency exchanges or wallets. Once established, they can use these accounts to: 

  • Deposit stolen funds: Launder money obtained through other fraudulent activities by cycling it through crypto exchanges
  • Initiate unauthorized withdrawals: Steal cryptocurrency directly from compromised accounts
  • Manipulate markets: Artificially inflate or deflate the value of specific cryptocurrencies through coordinated trading activity

SIM Swapping for 2FA Bypass

In this scheme, criminals use social engineering or illegally obtained personal information to convince a mobile carrier to transfer a victim's phone number to a new SIM card they control. This allows them to intercept two-factor authentication (2FA) codes and gain access to the victim's crypto accounts.

Deepfakes for Social Engineering

AI-generated deepfake videos or voice simulations can be used to impersonate legitimate figures or customer support personnel. These tactics can be employed to: 

  • Trick victims into revealing their login credentials or private keys
  • Convince investors to invest in fake Initial Coin Offerings (ICOs) created by the fraudsters

AI-powered Bot Activity

Fraudsters can leverage automated bots powered by AI to: 

  • Spam social media platforms and forums, promoting fraudulent crypto investment opportunities
  • Artificially inflate trading volume and liquidity of specific cryptocurrencies to make them appear more attractive to investors
  • Employ high-frequency trading techniques to exploit loopholes and manipulate cryptocurrency markets for personal gain

What is Synthetic Identity Theft?

Synthetic identity theft, a form of synthetic fraud, involves creating a fake identity by combining real and fabricated information. Criminals leverage stolen Social Security numbers, addresses, and other personal details to create a seemingly legitimate persona. This fabricated identity is then used to open bank accounts, obtain credit cards, or even invest in assets like cryptocurrency.

How AI is Amplifying Synthetic Fraud

Traditionally, creating synthetic identities was a time-consuming and laborious process. However, AI has entered the equation, making it easier and faster for criminals to generate realistic fake identities. Here's how:

  • Data Aggregation and Analysis: AI algorithms can scour vast troves of data, piecing together information from data breaches and other sources to build a foundation for a synthetic identity
  • Deepfakes and Voice Cloning: AI can be used to create realistic deepfake videos or voice simulations to further bolster the legitimacy of the fabricated persona
  • Automating Applications and Transactions: AI bots can automate the process of applying for loans, opening accounts, or even making investments, further streamlining the synthetic fraud scheme

The Threat to Crypto Investors

The rise of AI-powered synthetic fraud poses a significant threat to cryptocurrency investors. The decentralized nature of crypto transactions can make them attractive targets for criminals. With synthetic identities, fraudsters can potentially bypass Know Your Customer (KYC) protocols and gain access to crypto exchanges and wallets.

Protecting Yourself from Synthetic Fraud

You probably know by now that the best time to defend yourself against cyber scammers and hackers is well before these kinds of attacks. The more safeguards you put in place to protect your sensitive data, the less likely you are to ever experience any of these fraudulent attacks. While the tactics may be evolving, there are still steps you can take to safeguard your assets.

Be Wary of Unsolicited Contact

Never give out personal or financial information in response to unsolicited emails, calls, or texts, even if they appear legitimate. If you ever have a question about the legitimacy of an email from a person or institution, it is best to contact them directly and confirm that they did, in fact, send you the communication requesting information before passing it along. 

For example, receiving emails or texts from your bank about potential overdrafts or account activity is not out of the ordinary for many of us, but these communications should never ask you to confirm your account information or personal identification information such as your Social Security number. 

Scrutinize Account Statements

The best way to identify irregular activity in your crypto investments or accounts is to watch them like a hawk. This may seem like overkill, but things change rapidly in the world of cryptocurrency and things can go sour in a matter of minutes rather than days. 

Regularly monitor your financial statements, credit reports, and cryptocurrency wallet activity for any suspicious activity and report anything you see immediately. 

Enable Two-Factor Authentication

Two-factor authentication has been around for years but it remains one of your best lines of defense against unauthorized people trying to gain access to your account. Make sure that you utilize two-factor authentication (2FA) on all your financial accounts and crypto wallets to add an extra layer of security.

Use Strong Passwords and Update Regularly

Utilizing strong, unique passwords is paramount for safeguarding your online financial accounts and crypto wallets. These passwords should be complex combinations of uppercase and lowercase letters, numbers, and symbols, making them difficult to crack with brute force attacks. 

While it may be easier for you to remember, you should resist the urge to reuse passwords across different platforms, and avoid easily guessable information like birthdays or pet names. By following these practices, you make it significantly harder for criminals, even those wielding AI-powered tools, to gain unauthorized access to your valuable crypto holdings.

Consider a Security Service

Explore reputable identity theft protection services that offer monitoring and alerts for potential fraudulent activity. These services can act as an extra layer of defense, notifying you if your personal information appears on the dark web or is used to create new accounts. This allows you to take swift action to mitigate any potential damage.

When to Seek Legal Help

If you suspect you have been a victim of synthetic fraud, it is crucial to act swiftly. Levin Law P.A. has a dedicated team of experienced attorneys, including Brian Levin, who can guide you through the recovery process and explore your legal options. We understand the complexities of cryptocurrency and financial fraud, and we are committed to protecting your assets.

Don't wait until it's too late. Contact Levin Law P.A. today at (305) 402-9050 for a free 


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