AI Fueling Crypto Fraud and Cybercrimes, Experts Warn
On Friday, April 25, 2025, Law360 reported that artificial intelligence is intensifying both cybercrime and efforts to counter it, according to experts from BigLaw, the U.S. Department of Justice, and the tech sector. The insights emerged during a recent panel discussion hosted by the Federal Bar Association’s Northern District of California chapter in San Francisco.
The panel featured Donovan McKendrick, a special assistant U.S. attorney with the DOJ and FBI Cyber Division agent; William Frentzen, a partner at Morrison & Foerster LLP and former chief of the U.S. Attorney’s Office Northern District of California Corporate and Securities Fraud Unit; Tigran Gambaryan, head of financial crime compliance at Binance and former IRS cybercrimes investigator; and Alex Iftimie, deputy general counsel at OpenAI and former Morrison & Foerster partner. The discussion, moderated by Northern District of California Judge Jacqueline Scott Corley, focused on emerging cyberthreats.
Iftimie, who manages cybersecurity at OpenAI, emphasized the importance of safeguarding AI technology, describing it as a critical national asset. He highlighted concerns about its misuse, noting that AI enhances cybercriminals’ ability to craft convincing phishing messages and improve malicious code. The technology also aids in spreading misinformation, posing significant risks.
Gambaryan described the global competition to develop AI as an “arms race” among companies and nations. He noted that AI lowers the entry barrier for criminals, enabling more sophisticated cyberattacks and cryptocurrency frauds. However, he added that Binance leverages AI to strengthen compliance with financial regulations and detect illicit activities in cryptocurrency transactions. Gambaryan identified investment fraud and AI-powered ransomware as major threats.
Frentzen shared examples of recent cybercrimes, including a 2020 Twitter breach where hackers compromised high-profile accounts, such as those of Joe Biden and Elon Musk, to execute a Bitcoin scam. He explained that the attackers used social engineering to deceive new Twitter employees into providing access. Frentzen also referenced a case involving a crypto lending platform that lost $200 million to hackers. He pointed to the growing use of cryptocurrency “tumbler” services, which obscure the origins of funds and are often linked to money laundering.
McKendrick outlined three main categories of AI-related criminal activity: bad actors using AI to perpetrate harm, companies falsely claiming to use AI to attract investment, and foreign entities attempting to steal U.S. AI trade secrets. He acknowledged that federal resources are limited, forcing authorities to prioritize high-value cases. Reflecting on the Twitter hack, McKendrick noted initial uncertainty about whether it was a simple scam or part of a larger operation.
Judge Corley raised the possibility of private litigation addressing cryptocurrency fraud. Frentzen confirmed that such lawsuits are already underway, with victims targeting payment platforms and crypto exchanges for allegedly failing to implement adequate customer verification or suspicious activity monitoring. He noted that the success of these cases remains uncertain.
McKendrick highlighted a prevalent cryptocurrency scam where victims are enticed with early returns to build trust, only to lose significant investments later. He warned that AI-generated deepfakes, such as messages appearing to come from celebrities, are becoming more common and sophisticated, increasing the challenge for law enforcement and victims alike.
The panelists agreed that while AI empowers cybercriminals, it also equips defenders with tools to combat fraud and protect critical technologies. However, the rapid evolution of AI-driven threats continues to strain law enforcement’s capacity to respond effectively.
Source: Law360
