As AI-powered scams gain momentum, the Financial Industry Regulatory Authority (FINRA) has raised concerns over a surge in fraudulent schemes targeting retail investors, particularly those involving cryptocurrencies. At the 2025 FINRA Annual Conference, experts highlighted the escalating complexity of fraud schemes, driven largely by AI-generated content and deepfake technology, posing significant risks to unsuspecting investors.

The conference session, titled “Mitigating Impacts of Fraud and Scams Targeting Customers,” featured insights from key industry figures, including Christine Kieffer, Senior Director of Investor Education at FINRA; Brooks Brown, Senior Director at FINRA’s High-Risk Registered Representative Unit; Tara Ambrose, Senior Financial Fraud Ombudsperson at the Minnesota Department of Commerce; and Bismarck Prado, Director of Fraud & Senior Investor Protection at Commonwealth Financial Network.

AI-Powered Crypto Scams: A Growing Threat to Investors

Kieffer opened the discussion by pointing to the rise of AI-enabled scams that increasingly target retail investors through crypto-related schemes. According to the Federal Trade Commission (FTC), investment fraud, including crypto scams, accounted for $5.7 billion in consumer losses in 2024, making it one of the top three categories of fraud complaints.

Ambrose detailed how many scams begin with seemingly innocuous tech support pop-ups, which direct victims to call fake customer support numbers. Once connected, victims are led through elaborate scripts by scammers impersonating bank representatives or government officials, convincing them to move funds into fraudulent crypto wallets.

Prado highlighted how impersonation scams are becoming more sophisticated through the use of AI-generated deepfake videos and phishing emails that appear remarkably legitimate. “Victims are instructed to stay on the phone while transferring funds to Bitcoin ATMs, with scammers employing urgency tactics to keep them engaged,” Prado said.

Brown added that the application of AI has raised the bar for fraudsters, enabling them to craft highly convincing phishing materials that lack the usual spelling and grammar errors that once served as red flags. “AI has effectively closed the gap in quality, making it increasingly difficult for victims to identify fraudulent content,” he noted.

Combating AI-Driven Scams: A Unified Approach

The panel emphasized the need for a coordinated, multi-departmental response to counter AI-driven fraud. Brown advocated for firms to utilize FINRA Rule 2165, which permits temporary holds on suspicious account activity as a preventive measure.

Ambrose stressed the importance of implementing “smart friction” protocols, such as secondary verifications for crypto withdrawals, to mitigate potential scams. Prado underscored the necessity for real-time monitoring and rapid intervention, as scammers increasingly exploit AI to execute fraud schemes swiftly.

The panelists also emphasized the role of investor education, urging firms to actively inform clients about emerging scam tactics, including the use of AI-generated personas, deepfake videos, and voice impersonations.

FAQ Section:

Q1: Why are AI-driven scams so effective in crypto fraud?
AI enables scammers to produce realistic phishing emails, deepfake videos, and voice impersonations that are virtually indistinguishable from legitimate communications. This sophistication makes it easier for scammers to deceive victims into transferring funds or providing sensitive information.

Q2: How can financial institutions prevent AI-driven fraud?
Firms should implement multi-layered security protocols, including real-time monitoring, additional verifications for high-risk transactions, and cross-departmental coordination to detect and prevent fraudulent activity before it escalates. Additionally, educating clients on emerging threats and red flags is crucial in minimizing fraud risks.