Rising Deepfake Crypto Scams: $79.1B in Losses Since 2022, $25.13B Projected for 2024 – Should Deepfakes Be Illegal?

The Nightmare of Deepfakes – A $25 Billion Threat to Cryptocurrencies

Cryptocurrency, a revolutionary financial system, is facing a chilling new enemy: deepfakes.

These hyper-realistic synthetic videos, manipulated with artificial intelligence, are becoming a weapon of choice for cybercriminals, leading to a staggering projected loss of over $25 billion in 2024 alone.

A Surge in Synthetic Scams

According to a recent report by Bitget Research, deepfake-related crypto fraud has skyrocketed, resulting in a staggering $79.1 billion in losses since 2022.

This figure represents a terrifying 245% increase in just one year (2024).

The sheer number of deepfake-related scams is equally alarming.

The report reveals a staggering 245% rise in malicious deepfake cases globally compared to 2023.

This exponential growth paints a grim picture of the future, with Bitget analysts predicting a further 70% surge in crypto deepfake crimes by early 2026.

Dynamics of losses due to crypto deepfakes (Source: Bitget)

Q1 2024: A Period of Alarming Losses

The first quarter of 2024 serves as a stark warning.

Deepfake-related crypto losses skyrocketed to $6.28 billion, nearly half of the total losses incurred throughout 2022.

This dramatic increase suggests a growing sophistication among cybercriminals and a worrying vulnerability within the crypto space.

The Bullish Market's Dark Side

Interestingly, the study uncovers a disturbing link between deepfake crypto crimes and the Bitcoin Greed and Fear Index.

This index measures investor sentiment in the cryptocurrency market.

The report suggests that periods of bullish sentiment, when Bitcoin prices are soaring, coincide with an increase in deepfake-related crimes.

For example, the first quarter of 2024 witnessed a spike in deepfake crypto crimes, coinciding with a new all-time high for Bitcoin.

This correlation suggests cybercriminals exploit periods of heightened excitement and FOMO (Fear Of Missing Out) to target unsuspecting crypto investors.

Social Engineering and Bot Fraud: The Tools of the Trade

But how exactly are these deepfakes being used to steal crypto?

Bitget's report sheds light on the tactics employed by these fraudsters.

Social engineering and bot fraud are two of the most prevalent methods.

In the first quarter of 2024 alone, social engineering and bot scams involving deepfakes amounted to a staggering $2.03 billion in losses, highlighting the effectiveness of these manipulative tactics.

Deepfakes in Crypto Becoming A Global Threat

The report emphasises that deepfake crypto fraud is not a regional problem; it's a global one.

Criminals exploiting this technology can easily move their operations across borders, making it crucial for international cooperation to combat this threat.

A report by Sumsub, a verification company, revealed that deepfakes are spreading rapidly, with global incidents surging a staggering 10-fold between 2022 and 2023.

North America and the Asia-Pacific region are particularly vulnerable.

The lack of a comprehensive legal and cybersecurity framework specifically designed to address deepfakes in the crypto space further exacerbates the problem.

Elon Musk: The Face of Fake Giveaways

Elon Musk, the tech magnate and self-proclaimed "Dogefather," has become a prime target.

Just recently, a YouTube live stream, masquerading as a Tesla event with a deepfaked Musk, ran for a shocking five hours.

This deceptive broadcast promised viewers double their bitcoin, Ethereum, or Dogecoin deposits if they sent their crypto to a suspicious website.

The allure was strong, with over 30,000 viewers tuning in at its peak, pushing it to the top of YouTube's recommendations.

Even more concerning, this live stream was broadcast on multiple YouTube channels.

This wasn't an isolated incident.

Earlier in June, similar scams used deepfaked Musks to promote fake giveaways, often piggybacking on real-world events like the Starship launch.

Source: Trend Micro

The tactic isn't new; April saw Musk impersonators capitalise on the eclipse hype.

Deepfakes Target Singapore's Former Prime Minister

But Musk isn't the only one facing the deepfake menace.

Singapore's former Prime Minister, Lee Hsein Loong, recently found himself battling a social media ad campaign that featured deepfaked videos of him endorsing a dubious crypto investment scheme called Quantum AI.

Lee vehemently denied any involvement, highlighting the growing difficulty of discerning real from fake as deepfake technology evolves at an alarming rate.

You might have seen a deepfake video of me asking viewers to sign up for an investment product that claims to have guaranteed returns.

The video is not real!

AI and deepfake technology are becoming better by the day. On top of mimicking my voice and layering the fake audio over actual footage of me making last year’s National Day Message, scammers even synced my mouth movements with the audio. This is extremely worrying: people watching the video may be fooled into thinking that I really said those words.

Please remember, if something sounds too good to be true, do proceed with caution. If you see or receive scam ads of me or any other Singapore public office holder promoting an investment product, please do not believe them. You can also report them via the government’s ScamShield Bot on WhatsApp at go.gov.sg/scamshield-bot

I thank the many of you who alerted me to this latest scam. We must stay vigilant in order to protect ourselves and the ones around us. – LHL

This wasn't Lee's first rodeo with crypto scammers; in 2022, he had to warn the public about fake articles promoting him as a crypto advocate.

Educating Users is The First Line of Defense

While regulations and technological advancements are crucial for long-term solutions, Bitget CEO Gracy Chen emphasises the importance of educating users as the first line of defense.

Equipping users with the knowledge and skills to discern legitimate crypto opportunities from deepfake scams is essential.

Until a global framework is established, user vigilance remains the most effective shield against these sophisticated digital forgeries.

The battle against deepfake crypto fraud has just begun.

With billions of dollars already lost and the potential for even greater devastation, it's a fight that demands immediate and coordinated action from industry leaders, regulators, and most importantly, a well-informed crypto community.

Should Deepfakes be Illegal?

Scammers exploit the public's trust in well-known figures, impersonating public figures from US-based entrepreneur Elon Musk to Singapore politician Lee Hsien Loong.

The staggering losses from deepfake crypto scams, exceeding $79 billion since 2022, paint a grim picture.

While the technology itself holds potential, the ease with which it can be weaponised for fraud is alarming.

Deepfakes exploit our trust in familiar faces and voices, making it nearly impossible for some to discern the real from the artificial.

Considering the financial devastation and the potential erosion of trust in public figures, a strong case can be made for a complete ban on deepfakes, at least until robust safeguards and regulations can be established.