Spotting crypto fraud: key red flags every investor and platform should be aware of

A new report has listed several common red flags that might help both crypto companies and regular users to protect their funds. They range from deepfakes and AI-forged IDs to sudden high-value trades linked to “pig butchering.”

In The Typologies Report, blockchain analysis company Elliptic analyzed AI-enabled crime schemes, "pig butchering," and stablecoin-related schemes, offering ways to spot early warning signs and stay safe.

For example, when an illicit actor creates an account at a crypto platform using AI-enabled technologies such as image and video generation, their identity documents may be inconsistent with other information they’ve been asked to provide, while images may show anomalies.

Also, according to the researchers, if a customer’s account shows unexplained high volumes or values of transactions that don’t appear consistent with their known purpose of business, this might be another red flag.

Meanwhile, crypto users should be aware of possible deepfake videos, for example, those with unsynced lip movements, as criminals try to trick their victims by pretending to be from legitimate platforms. Additionally, a person can check publicly available regulatory databases to see whether a regulator has granted authorization to the trading service.

When it comes to "pig butchering," a crypto platform, according to Elliptic, should be suspicious if a new customer with no previous trading experience suddenly buys a relatively large amount of crypto assets, in the high five- or even six-figure range.

"When questioned about their activity, the victim may show little to no understanding of crypto assets. The victim may also appear confused, defensive, or reluctant to provide information about the scam (potentially out of embarrassment or shame)," the researchers noted.

They have also warned of so-called mule accounts, used to launder "pig-butchering" proceeds.

For example, these accounts may have common registration information, such as residential addresses, similar IP address data, and patterns of internal transfers on the same platform made between various mule accounts.

To spot a possible stablecoin-related crime, Elliptic suggests being more vigilant if a user of a crypto platform operates in, or is employed by, a sector commonly associated with sanctions evasion, such as the oil and gas or luxury goods industries.

Another red flag, according to the researchers, is if a person receives or requests large volumes of stablecoin transfers without a clear explanation.

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