Elliptic Report Reveals Surge in AI-Driven Crypto Crime
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Surge in AI-Driven Crypto Crime

In a recent report, blockchain analytics firm Elliptic highlighted a troubling surge in crypto scammers’ use of artificial intelligence (AI) technology. These criminals leverage sophisticated AI tools to launch state-sponsored attacks, deep fake scams, and other illicit activities, marking a new era of cyber threats in the crypto industry.

One of the key findings in the Elliptic report is the advertisement of an “unethical” generative pre-trained transformer (GPT) on the dark web. The report discovered deepfake videos featuring prominent figures such as Elon Musk and former Singaporean Prime Minister Lee Hsien Loong that are being used to promote fraudulent investment schemes.

The report emphasizes that scammers increasingly use deepfake technology on social media to deceive victims into surrendering their crypto funds. Specifically, crypto giveaways and doubling scams exploit deepfake videos of crypto CEOs and celebrities to defraud victims of their crypto assets.

Utilizing AI for Cyber Crimes

Moreover, the report highlights the involvement of North Korean state-sponsored hackers in these sophisticated scams. The notorious Lazarus Group is reportedly using AI to enhance their criminal activities.

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Anne Neuberger, the US Deputy National Security Advisor for Cyber and Emerging Technologies, stated that certain nation-state actors, including North Korea and criminal organizations, leverage AI capabilities to enhance cyber threats. According to her, they are using AI to speed up the development of malicious software and identify vulnerable systems to target

The Elliptic report also referenced the increase in dark web activities. For instance, a 23-year-old man was arrested in New York last month for operating a $100 million dark web narcotics marketplace.

The arrest followed an FBI investigation that traced his cryptocurrency transactions. Furthermore, Elliptic detected discussions on multiple dark web forums regarding using large language models (LLMs) for various malicious purposes.

These include reverse-engineering crypto wallet seed phrases, circumventing authentication protocols for services like OnlyFans, and offering alternative image manipulation services like DeepNude.

Crypto Exchanges in South Korea Fail to Refund Investors on Shutdown

Meanwhile, a recent study by the Financial Supervisory Service (FSS) and the Korea Financial Intelligence Unit revealed that 70% of cryptocurrency exchanges in South Korea have failed to refund investors after ceasing operations.

The joint study found that seven out of ten crypto exchanges did not return investors’ funds upon shutdown. Notably, six of these exchanges failed to notify their customers about their plans to cease operations.

The FSS pointed out that these exchanges’ inadequate responses caused extreme inconvenience for the affected customers. This inefficient process underscores the urgent need for more stringent regulatory oversight in the cryptocurrency market.

South Korea’s Huge Crypto Market

As the third-largest cryptocurrency market globally, with more than 6 million Koreans (or 10% of the nation’s population) involved in crypto trading via exchanges in the first half of 2023, there’s a need for robust regulatory frameworks to protect investors. Accordingly, the FSS is collaborating closely with other financial authorities to develop and enforce regulations governing the closure of financial firms.

The upcoming virtual asset investor protection law will take effect by July 2024. Exchanges’ failure to refund investors is not confined to South Korea; similar issues have been observed globally.

By developing comprehensive guidelines and enforcing stricter regulations, South Korea aims to set a precedent for better investor protection in the cryptocurrency market. However, continuous vigilance and enforcement will ensure these measures are effective.

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George Ward

By George Ward

George Ward is a crypto journalist and market analyst at Herald Sheets, known for his engaging articles on the latest digital currency trends. With a background in finance and journalism, he presents complex topics accessibly. George holds a degree in Business and Finance from the University of Cambridge.

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