A network security firm is warning that criminals have developed an artificial intelligence tool that targets crypto exchange platforms. Cato Networks states that bad actors are selling a deepfake tool in underground markets, allowing users to bypass a crypto exchange’s identity authentication tests. According to the firm, users rely on the tool not to hack into existing accounts but to create fake ones for money laundering purposes.
The report reveals that new account fraud accounted for more than $5.3 billion in losses in 2023, up from $3.9 billion in 2022. Cato Networks explains that the bad actors initially generate fake credentials and images using AI-rendering websites. They subsequently use the deepfake tool to forge passports and create videos designed to pass a crypto exchange’s facial recognition systems.
After those steps, the criminals upload the fake government ID to a crypto exchange to create a new and verified account. The report details that the tool allows the user to connect the video they created as if it is the camera’s input when asked to open the computer’s camera for facial recognition. The firm also shares a video showing how the tool was used to create a verified level one account on a crypto exchange in a matter of minutes.
Deepfake tool exploits crypto exchanges
Cato Networks advises that crypto exchanges should update their security systems to combat new account fraud attacks. The firm recommends collecting threat intelligence and staying up to date on the latest cybercrime trends, as threat actors will continue to evolve and find ways to employ new deepfake technologies and software to their advantage.
Binance’s former CEO, Changpeng “CZ” Zhao, has admonished the global crypto community to stay vigilant about AI-generated deepfakes promoting cryptocurrency scams on social media after being released from jail. Zhao wrote on X, formerly known as Twitter, warning about deepfake videos of him on other social media platforms. Several prominent media figures have recently been impersonated using deepfakes, including former president Donald Trump, billionaire songwriter Taylor Swift, Ripple CEO Brad Garlinghouse, Tesla CEO Elon Musk, and Zhao himself.
Vice President Kamala Harris’ recent overture to the crypto industry has also ignited concerns that the Democratic presidential nominee might soon see her own wave of AI-generated deepfakes touting crypto tokens. According to blockchain data forensic firm Elliptic, most deepfake crypto scams follow a familiar pattern, inviting unsuspecting individuals on the web to substantially increase their earnings if they transfer cryptocurrency to a specific crypto wallet address, only for the promised rewards never to appear. Zhao was released from a prison cell in California last month, after serving a sentence of four months for violating U.S. rules around money laundering and other violations around the Bank Secrecy Act.
Binance pleaded guilty and was subject to a $4.3 billion penalty, while Zhao was hit with a $50 million penalty, along with an additional $50 million penalty to the U.S. Commodity Futures Trading Commission. Zhao has also stepped down from the crypto firm and has expressed that Binance seems to be doing well without his intervention, which he considers every founder’s dream.
