Crypto Fraud Ecosystem Hits $12.4 Billion as AI, Pig Butchering Powers New Scams
Cryptocurrency
scams are on track to reach an unprecedented $12.4 billion in 2024, with
artificial intelligence and sophisticated investment schemes driving the surge,
according to new data from blockchain analytics firm Chainalysis.
Crypto Investment Scams
Set to Hit Record $12.4 Billion in 2024
The firm’s latest
report reveals that cryptocurrency-based fraud has already accumulated $9.9
billion in illicit proceeds this year, with high-yield investment schemes and
“pig butchering” scams accounting for more than 83% of all crypto
fraud revenues.
High-yield
investment scams remained the dominant form of crypto fraud, representing 50.2%
of all scam revenue in 2024. However, these schemes saw a 36.6% decline from
the previous year as fraudsters increasingly shifted toward more elaborate
“pig butchering” operations, which grew by nearly 40% year-over-year.
“While
education is important, we can’t educate our way out of this problem, but
change is possible by putting regulation in place to protect consumers,” commented
Clark Flynt-Barr, government affairs director, financial security at AARP.
In August
of last year, Chainalysis reported that hackers had
stolen nearly $1.6 billion in cryptocurrency over the first eight months of
2024—almost matching the total amount stolen throughout 2023.
1/10 Today, we published our scams section of our Crypto Crime Report, revealing that 2⃣0⃣2⃣4⃣ is set to be a record-year for scammers. What else did we find? We’ve pulled some of the most interesting figures in the 🧵thread below 👇
— Chainalysis (@chainalysis) February 13, 2025
AI-Powered Crypto Scams
Surge 40% as Fraudsters Target Retail Investors
The rise of
artificial intelligence has dramatically lowered the barriers to entry for
scammers. Chainalysis found that AI service vendors on illicit platforms saw
revenue growth of 1,900% since 2021, enabling fraudsters to create more
convincing fake personas and automated scam operations.
“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, head of fraud products at Chainalysis and
co-founder of Alterya. “It facilitates the creation of synthetic and fake
identities, allowing fraudsters to impersonate real users and bypass identity
verification controls.”
“Additionally,
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,” said Fouks.
One notable
case involved Smart Business Corp, a decade-old Ponzi scheme
targeting Spanish-speaking countries, which has received $1.5 billion in
cryptocurrency transfers after promising outsized returns through a tiered
investment scheme.
7/10 In 2024, Huione scam technology vendors collectively received at least $375.9 million in cryptocurrency. 🤖 AI service vendors’ revenue had a compound annual growth rate of 1900% between 2021-2024, indicating an 💣explosion in the use of AI technology to facilitate scams. pic.twitter.com/JUocIYKEY9
— Chainalysis (@chainalysis) February 13, 2025
Expensive Bitcoin = More
Scams
The
surge in crypto prices, coupled with increased retail investor interest
following recent market rallies, has created an ideal environment for
fraudsters. Chainalysis data shows that scam operations are becoming
increasingly interconnected, with sophisticated infrastructure providers
offering turnkey solutions for aspiring fraudsters.
“We’re
seeing a concerning trend where scammers are reinvesting their profits into AI
technology to execute new schemes,” explains Eric Heintz, a global analyst
at International Justice Mission. “The cycle typically repeats every 20-27
days, indicating a highly organized and efficient operation.”
Law
enforcement agencies worldwide are struggling to keep pace with the evolving
threat. The FBI’s Internet Crime Complaint Center reported
that cryptocurrency-related suspicious activity reports have increased by
43% since 2020, with elderly victims particularly vulnerable to these schemes.
A separate
report from Cyvers revealed that 3
out of 4 crypto thieves remain unpunished, walking away with over $1
billion acquired through fraudulent means.
This article was written by Damian Chmiel at www.financemagnates.com.