California Warns Investors About Rising Crypto and AI-Related Scams

The California Department of Financial Protection and Innovation (DFPI) and the Department of Justice (DOJ) have identified a sharp increase in cryptocurrency and AI-related scams that started in 2024. Fraudsters are leveraging fake investment platforms, phishing attacks, and AI-generated endorsements to deceive victims, resulting in billions in losses. As authorities crack down, investors are urged to stay vigilant.

Surge in Crypto and AI Fraud Cases

The DFPI reported 2,668 complaints from victims falling prey to newly emerging scams, many of which had not been previously recorded. Among the most prevalent are fake Bitcoin mining schemes, which lure investors with promises of high returns, and fraudulent crypto gaming platforms that drain user funds after deposits.

Other scams include fake job offers requiring crypto payments, phishing attacks targeting private keys through deceptive airdrops, and investment groups on WhatsApp and Telegram exploiting trust to steal funds. AI-generated scams have also surfaced, promising guaranteed high returns while using deepfake endorsements from public figures to appear legitimate.

How Criminals Are Expanding Their Reach

The rapid growth of AI has enabled the rise of Crimeware-as-a-Service (CaaS), where hackers sell malicious tools to less experienced scammers. This trend has made cyber fraud more accessible and difficult to combat. DFPI Commissioner KC Mohseni emphasized the importance of verifying website domains and avoiding investment opportunities that sound too good to be true.

Through state-level partnerships, California regulators have shut down 26 fraudulent crypto websites, uncovering $4.6 million in losses over the past year. Meanwhile, the California DOJ took down 42 scam websites in 2024, revealing that victims lost a total of $6.5 million, averaging $146,000 per person.

Most Damaging Crypto Scams of 2024

A report from blockchain security firm Cyvers highlighted pig butchering schemes as the most financially devastating scams, accounting for $5.5 billion in losses across 200,000 cases. These scams involve fraudsters building long-term trust with victims before manipulating them into making large deposits into fake investments.

Additionally, phishing attacks were flagged as the most dangerous security threat by CertiK’s Web3 Security Report, with losses totaling $1 billion across 296 incidents.

Scammers Exploit Economic Fears

The fraud wave extends beyond the U.S. as Canadian regulators warn that scammers are using fake news articles and AI-generated content to exploit fears around trade war tensions. The Alberta Securities Commission recently exposed CanCap, a fraudulent investment scheme that used fabricated endorsements from former Prime Minister Justin Trudeau in fake CBC news articles.

Similarly, New Brunswick’s Financial and Consumer Services Commission flagged a related scam that falsely claimed Premier Susan Holt endorsed a crypto project. These fraudulent platforms are constantly rebranding under new names to evade detection.

Call for a Unified Crypto Scam Reporting System

Coinbase’s Chief Security Officer, Philip Martin, has called for a centralized crypto scam reporting system in the U.S. He criticized the current fragmented approach, where victims report scams to multiple agencies like the FBI’s Internet Crime Complaint Center (IC3), often receiving little feedback. Martin argued that a unified system would improve tracking, enforcement, and victim support.

Retired FBI agent Roger Campbell echoed Martin’s concerns, suggesting that the U.S. could learn from the UK’s centralized crime reporting model. The California DFPI’s recent wave of complaints underscores the urgent need for a more effective framework to combat financial fraud in the crypto space.

Final Thoughts

The rise of AI-driven scams and sophisticated crypto fraud underscores the evolving challenges in online security. As regulators work to shut down fraudulent platforms, investors must remain cautious and informed. Authorities recommend verifying all investment platforms, avoiding too-good-to-be-true promises, and reporting suspicious activities to regulatory agencies.