Broadcast Retirement Network’s Jeffrey Snyder discusses crypto fraud and scams with Jacqueline Burns Koven of Chainalysis.
Jeffrey Snyder, Broadcast Retirement Network
Well, Jacqueline, it’s so great to see you. Thanks for joining us this morning.
Jacqueline Burns Koven, Chainalysis
Thank you so much for having me.
Jeffrey Snyder, Broadcast Retirement Network
Well, $17 billion. That seems like a lot of money. I wish it was in my pocket, but apparently it’s estimated stolen in crypto scams and fraud.
I want to get your reaction to that number. It seems quite high to me.
Jacqueline Burns Koven, Chainalysis
Absolutely. It is absolutely high. It is the highest we’ve ever recorded in terms of cryptocurrency loss to scams.
We attribute that to a number of factors. I’m sure many people watching have experienced it themselves, scammers coming right into their phones, right into their email inboxes, right into their social media profiles. We’re dealing with an adversary that is adept at leveraging new technology to get to people to where they are.
They’re leveraging advanced technologies like AI to scale their scheme, but also make it more convincing.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. I just want to be clear. We’re not saying that crypto is a problem.
What we’re talking about is the human engineering that is being done to commit fraud. Jacqueline, this is coming from all over the world. This is not just the United States.
This is coming from bad actors, foreign governments, foreign entities.
Jacqueline Burns Koven, Chainalysis
Right. This really requires a whole-of-government approach because this is a global issue. Scammers are operating from abroad, but they’re also homegrown.
We also need to understand how we can mitigate those risks domestically and abroad with our foreign partners. Leveraging the financial institutions, the cryptocurrency businesses, the private sector are also a part of the solution, right? They’re best positioned to prevent additional scams and prevent additional victims from ever even engaging with a scam.
This truly is a multifaceted, complex issue, but we also have to understand that some of the people behind the scams are trafficking victims themselves. We’re understanding more about these scam compounds in Southeast Asia that are migrating globally with people who are coerced or threatened or even kidnapped and forced into these scams, which are touching people around the world.
Jeffrey Snyder, Broadcast Retirement Network
It’s certainly tragic. Then to be coerced into doing something highly illegal and invasive, I mean, that’s like a double-edged hit for people. You mentioned a whole-of-government approach.
I don’t know much about the cybersecurity sector or the market, but I have to think that you need the financial institutions and the government to be able to focus on this so that you can go on the offensive and get to these bad actors before they get to our citizens, get people like me.
Jacqueline Burns Koven, Chainalysis
Absolutely. The beauty of cryptocurrency and blockchain, not all scams are seeking cryptocurrency. Some are after your banking details, but a lot of these scammers are using cryptocurrency to buy those tools and services, to send those bulk text messages, to buy those fake social media profiles.
Any component of a scam that leveraged cryptocurrency is an opportunity for disruption because it’s fully traceable. Those blockchain transactions are in a public ledger. Chinalysis has been identifying entities on the blockchain, and there’s the potential for not just seizing those illicit proceeds, but also restitution, returning those to victims.
Our data has been used in court and can make victims whole again. With the scale of scams that we face today, we also need to think about prevention. We need to fight fire with fire, bringing the fight to the scammers.
They’re leveraging AI. We need to as well. Chinalysis has also integrated Alteria, which is AI-powered fraud prevention tools, that is collecting scammer infrastructure from across online platforms, payment systems, blockchains, domain, social media profiles, so that we can get an overall picture of the scam ecosystem.
Financial institutions and exchanges can integrate that data into their platforms so they can prevent their customers from ever engaging with a scam. We want those scammers to be tied up, engaged in other things, but not involved with human beings. It also empowers law enforcement to have a better picture of the scam ecosystem for targeted disruption.
We really need to focus on holistic disruption, not just of the scammers, but of all the tools and infrastructure that are underlying in helping them perpetrate these scams.
Jeffrey Snyder, Broadcast Retirement Network
I think it’s interesting you mentioned. What I’ve read, both in the report and also elsewhere, is that scammers are leveraging AI to commit fraud, but what you’re discussing is actually leveraging AI to counter the AI or the scammers that are using it to conduct fraud.
Jacqueline Burns Koven, Chainalysis
Yes, we have to. We can always count on criminals to abuse novel technologies, whether that’s the internet, blockchain, AI, and this is no different. What we’ve seen in our recent research is that scams that leverage AI are 4.5 times more profitable than scams that don’t. We’re rapidly moving to a future where virtually all scams are going to incorporate some element of AI to make them more convincing and scalable. On the flip side, we need to incorporate AI to be more scalable, more decisive, and streamline efforts to dismantle these conglomerates.
Jeffrey Snyder, Broadcast Retirement Network
Is there anything that we can do as individuals? Obviously, I’m not going to be able to create my own artificial intelligence to defend myself against bad actors, but are there things that we can do? Is it just more awareness and education as an individual in terms of protecting ourselves?
Jacqueline Burns Koven, Chainalysis
I think scammers capitalize on not just disjointedness of government efforts and private sector efforts to counter them, but also gaps in human connectedness. If you’ve talked to somebody about something before sending money, talk to another human, get a gut check on something, take a moment to think about it. The reality is nobody is immune to these scams, regardless of class, race, age, education, profession.
We’ve seen it all. They’re getting so convincing. We need to empower people to talk about it.
Obviously, there’s a lot of emotions tied up in scams, including shame that prevents people from talking about it or even reporting to law enforcement, but we need to be more open about it because it’s impacting all of us.
Jeffrey Snyder, Broadcast Retirement Network
Jacqueline, we’ve had a great discussion this morning. We’ve covered a lot. In the last minute, what do you think are some of the key takeaways from the discussion today?
Jacqueline Burns Koven, Chainalysis
Yes. I think some of our key findings are that we really put a spotlight on Chinese organized crime groups that are behind some of the most devastating scams that we’re seeing today. We do that not just because they’re the most lucrative, but they’re probably the most technologically advanced.
They are really setting the standard for which we fear other scam groups around the world could adopt and leapfrog into sophistication to become more devastating as well. I think what we also want to highlight is the ripe opportunities for disruption. The use of cryptocurrency is and should be the Achilles heel of these scam groups and allow us more disruption opportunities.
What I would want to leave people with is the urgency to report to state, local, federal government. There’s a number of entities that you can report these crimes to and you never know what other victims you might prevent from falling prey to the same scam.
Jeffrey Snyder, Broadcast Retirement Network
You’ve very well said it. Look, I don’t want to be cliche, but it does take a village and if you don’t let people know, they can’t act on your behalf or on others. Jacqueline, it’s so great to see you.
Thanks for joining us. Great research and we look forward to having you back on the program again very soon.
Jacqueline Burns Koven, Chainalysis
Thank you so much for having me.