California’s financial regulator issues warning about seven emerging crypto and AI-related scams

The California Department of Justice reported shutting down 42 fraudulent crypto websites in 2024, which had collectively scammed users out of $6.5 million.

A California financial regulator has identified seven previously unseen types of crypto and AI scams, based on thousands of complaints filed in 2024.

In a March 10 statement, the California Department of Financial Protection and Innovation (DFPI) reported receiving 2,668 complaints last year, uncovering new fraud tactics such as fake Bitcoin mining schemes that lure victims into bogus investment opportunities.

Other emerging scams include fraudulent crypto gaming platforms that entice users to deposit funds before draining their wallets and deceptive job offers that trick individuals into transferring crypto and sharing personal information.

Source: California Department of Financial Protection and Innovation

Victims also reported losing private keys through fake airdrops, falling for fraudulent investment groups on WhatsApp and Telegram, and being lured into AI investment scams promising unrealistically high returns. Some also had their crypto stolen after engaging with deceptive websites.

The AI industry saw substantial growth in 2024, reaching a market cap of $638 billion, according to Precedence Research. However, this boom coincided with a rise in crimeware-as-a-service (CaaS), where seasoned cybercriminals sell hacking tools and services to less experienced offenders.

DFPI Commissioner KC Mohseni urged users to exercise caution when dealing with unfamiliar platforms, verify website domains to avoid fraudulent imitations, and be wary of crypto recovery scam sites.

In collaboration with the state, the DFPI shut down over 26 fraudulent crypto websites in 2024, uncovering $4.6 million in user losses.

California DOJ Cracks Down on Crypto Scams

The California Department of Justice (DOJ) dismantled 42 fraudulent crypto websites in 2024, which collectively stole $6.5 million from victims, with an average loss per person reaching $146,306.

In a March 10 statement, the DOJ highlighted the challenges of prosecuting international fraudsters, who often operate beyond US jurisdiction. The common red flags among these scam sites included unrealistic promises of high returns, a lack of contact information, sign-up incentives disguised as prizes, and the absence of listings on reputable platforms like CoinMarketCap.

A report by on-chain security firm Cyvers highlighted pig butchering schemes as one of the most expensive scams in 2024, estimating total losses at over $5.5 billion across 200,000 recorded cases.

Meanwhile, blockchain security firm CertiK's annual Web3 security report identified crypto phishing attacks as the biggest security threat of the year, with users losing $1 billion across 296 incidents.