Fool's gold in the age of AI

Some of the insights and information presented in this article are taken from the Elliptic Report 2024, titled "AI-enabled crime in the cryptoasset ecosystem." This comprehensive report explores the emerging risks and trends at the intersection of artificial intelligence and cryptocurrency, showing how AI-powered scams and fraudulent activities within the crypto space are now harder to detect and discover. Towards the end I share some of my ideas and concerns beyond the crypto industry and more on the ethically debate around AI technology.

AI as a buzzword has already created a multitude of scams. Fraudulent investment platforms that tout AI-powered trading or arbitrage capabilities are quite common nowadays. The U.S. Commodity Futures Trading Commission (CFTC) has issued warnings about these "AI trading bot" scams, which often use buzzwords like "quantum," "Web3," and "DeFi" to lure victims.

How to identify scams? The traditional rule of thumb is "if it seems too good to be true, it probably is," but the recent success of some meme coins with extraordinary returns has blurred the line between legitimate projects and scams. While excessive use of technical jargon without clear explanations could be a red flag, some genuine projects, like the popular meme coin Dog Wif Hat, avoid technical jargon altogether. Additionally, while anonymity and a lack of transparency about the team behind a project are usually warning signs, even this paradigm is sometimes challenged by successful meme projects with anonymous teams.

Deepfake technology has opened a Pandora's box of deception, enabling scammers to impersonate authority figures, creating realistic videos of celebrities and political leaders endorsing fraudulent crypto projects, lending them an air of legitimacy. This tactic was recently employed in Singapore, where a deepfake video of former Prime Minister Lee Hsien Loong was used to promote a fraudulent investment scheme.

Moreover, AI is being used to streamline and automate scam operations. In large-scale scams like "pig butchering," AI-generated communication scripts and fake profile images make these scams more efficient and harder to detect. Even high-level executives at major companies have fallen prey to deepfake scams during online meetings, resulting in significant financial losses.

The line between legitimate AI use and deception is increasingly blurred. While AI can undoubtedly streamline and accelerate the development of legitimate projects, it also opens the door for deception. For instance, using AI to generate a website or content for a project is acceptable, but fabricating team members with AI-generated avatars and names crosses ethical boundaries. This practice misleads potential investors and raises concerns about the project's authenticity. The crypto community needs to establish clear guidelines to navigate this evolving landscape and ensure transparency and ethical practices in the use of AI.

Consider the example of Sophia, the AI robot. Everyone is aware that "she" is not human, yet people engage with her as if she were, showcasing our willingness to interact with AI as social beings. Sophia's advanced social capabilities and human-like appearance have allowed her to take on roles traditionally reserved for humans, such as being granted Saudi Arabian citizenship and named the United Nations Development Programme's first Innovation Champion.

Similarly, in the future, a founder using AI for coding or content creation might choose to give that AI a face and name on their website, essentially treating it as a team member. While the AI is not human, it performs the functions of a human developer or content manager. The question is whether this transparency about the AI's role is sufficient or if it's still considered deceptive to present an AI as a human employee.

This blurred line raises important ethical questions about transparency and authenticity in the use of AI. As AI becomes more integrated into our lives, it will be crucial for the crypto community and society as a whole to establish clear guidelines and ethical standards for the representation of AI in professional settings.

Since ChatGPT's release in November 2022, we have witnessed AI's immense potential for both innovation and deception. The awe-inspiring capabilities of AI have been met with concerns about job displacement and economic disruption. However, the primary focus of this article is to underscore the alarming potential of AI-generated content to deceive even the most discerning individuals, leading them to make decisions that are detrimental to their financial well-being and overall lives.