Enhancing Safeguards Against AI Fraud
By Kriti Bansal|Edited by Sarah MortonUpdated Jul 16, 2026, 2:57 p.m. Published Jul 16, 2026, 2:54 p.m. 5 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on SummaryShowYou’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.
Happy Thursday, advisors!
In this edition, Kriti Bansal explores the increasing threat of AI-enabled fraud and outlines a set of robust financial controls that advisors can implement to protect their clients' assets from sophisticated impersonation schemes.
Additionally, in the “Ask an Expert” segment, Varun Choudhary, CEO of ORO, shares insights on how financial managers can automate protective measures against fraud by adopting programmable smart accounts and employing automated monitoring for enhanced security at the account level.
Enjoy your reading.
AI's Impact on Crypto Fraud: Traditional Financial Controls as the Best Defense
With AI making impersonation cheaper and more believable, the most effective defense for advisors lies not in spotting fakes but in established practices like verification and duty separation.
Historically, fraud in the cryptocurrency space relied on high volumes of phishing attempts; however, the introduction of artificial intelligence has transformed the landscape. Fraud is now easier to fabricate, more personalized, and alarmingly convincing—often masquerading as trusted contacts.
The scale of this issue is staggering: the FBI’s Internet Crime Complaint Center reported a record $20.9 billion in cybercrime losses in 2025, with cryptocurrency being the preferred payment method (FBI). According to Chainalysis, an estimated $17 billion was funneled into crypto scams during the same timeframe, with operations utilizing AI tools proving to be about 4.5 times more profitable than those that did not. The average payment made in scams saw a dramatic increase, rising to $2,764 from the previous year.
Average crypto scam payment, 2024–2025. Source: Chainalysis, 2026 Crypto Crime Report.In response, advisors may instinctively aim to enhance their ability to identify fakes; however, this approach may not be sustainable. With synthetic videos and cloned audio becoming increasingly convincing, a more effective strategy involves the financial controls that advisors are already familiar with. Advisors have a fiduciary duty to protect client assets, which, according to the SEC’s custody rule under the Investment Advisers Act, relies on verification, separation of responsibilities, and proper reconciliation. Given that digital asset transactions are irreversible once completed, these controls are even more crucial.
A control framework that advisors can implement for digital asset workflows.- Scalable impersonation. Chainalysis noted a staggering 1,400% rise in impersonation scams. Advanced tools such as real-time face-swapping, voice cloning, and large language models enable fraudsters to convincingly portray clients’ advisors or support agents, even during live interactions. Simply verifying identity through a phone call is no longer adequate.
- Automated persistence. Investment scams known as “pig butchering,” which involve extensive relationship-building over weeks, caused victims to lose $7.2 billion in 2025. AI now allows scammers to maintain these deceptive conversations with multiple targets simultaneously.
- Cost-effective fabrication. The creation of convincing fake trading platforms, synthetic testimonials, and fabricated news segments can now be accomplished in mere minutes instead of requiring a professional team.
Effective Controls
- Dual authorization for asset transfers. No individual should have the sole authority to move client funds or approve transactions. Requiring two independent approvals ensures that even a convincing impersonation of one person is insufficient to execute a transfer. This traditional control is among the most effective against AI-driven impersonation.
- Out-of-band verification. Any request to transfer funds or alter a wallet address should be confirmed through a separate, pre-established communication channel—such as a call to a known number—rather than responding directly to the request. Urgency should trigger increased scrutiny, not less.
- Independent reconciliation. Advisors can regularly verify client holdings against the blockchain, as balances are traceable on-chain, performed by someone not involved in initiating transactions. Any unexplained discrepancies may signal a problem.
- Custodian and platform diligence. Advisors should review a custodian’s SOC reports, proof of reserves, and asset segregation practices. The digital-asset accounting standard ASU 2023-08, which mandates fair-value reporting of crypto holdings, provides advisors with additional disclosure to request and verify.
Conclusion
AI has not introduced new types of fraud but has made executing existing fraud schemes significantly cheaper. This shift increases the responsibility for everyone handling client assets to maintain rigorous proof of security. Advisors who excel at safeguarding their clients will not be those who become adept at identifying fakes, but rather those who integrate disciplined financial controls into their routine practices concerning digital asset management. In an age where nearly everything can be convincingly replicated, a verified process remains the most reliable safeguard. How prepared is your practice?
- Kriti Bansal, vice president finance and accounting, AlphaPoint
Ask an Expert
Q. Can advisors leverage AI to enhance client safety against fraud?
A. Yes, AI can assist advisors but should not operate as an independent decision-maker. It can identify unusual wallet activities, suspicious contracts, phishing patterns, and potential risks before any harm occurs. The primary risk is granting AI agents unrestricted wallet access, which can turn them into significant vulnerabilities for social engineering or erroneous on-chain data.
Q. What does real-time security look like in the AI era?
A. In the AI era, real-time security must be predictive and proactive rather than reactive. It involves providing alerts before approvals, continuous wallet monitoring, immediate notifications for abnormal activities, and blocking risky approvals before funds are transferred.
Q. How can a financial manager automate a defense mechanism that continuously monitors threats?
A. Financial managers should transition from traditional externally owned wallets to programmable smart accounts like ERC-4337 or EIP-7702. This transition allows for the implementation of automated security protocols directly at the account level, enabling continuous monitoring of wallets, approvals, contract risks, transaction patterns, and exposure limits, with human intervention for any anomalies.
- Varun Choudhary, co-founder and chief executive officer, ORO
Continue Reading
- AI agentic payments are entering the mainstream as Visa, Mastercard, and Ripple support the x402 standard.
- Senior White House officials are set to meet with senators Thursday to address the CLARITY Act's ethics provisions, the last major hurdle for the crypto legislation.
- The Depository Trust & Clearing Corporation (DTCC) has executed its first series of live production trades involving tokenized securities, marking a significant real-world test of blockchain technology in traditional finance.
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Gate Leads Spot Market Share Gains as CEX Volumes Rise for First Time in Five Months
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In June, CEX trading volumes experienced their first increase in five months, with spot trading rising by 15.3% to $1.11 trillion, and RWA perpetual volumes reaching a record $311 billion.
By CoinDesk ResearchJul 13, 2026In June, CEX trading volumes experienced their first increase in five months, with spot trading rising by 15.3% to $1.11 trillion, and RWA perpetual volumes reaching a record $311 billion.
Why it matters:
In June, CEX trading volumes experienced their first increase in five months, with spot trading rising by 15.3% to $1.11 trillion, and RWA perpetual volumes reaching a record $311 billion.
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