Deepfake crypto scam using Elon Musk underlines the rising AI fraud in Hong Kong

The Hong Kong Securities and Futures Commission (SFC) has recently issued a severe warning about a deepfake scam involving Elon Musk, aimed at promoting a fraudulent cryptocurrency trading platform called "Quantum AI". Based on a South China Morning Post Report, this incident highlights a growing trend in AI-related fraud, particularly within Asia.

Quantum AI scam and regulatory response

On May 8, the SFC alerted the public to the scam, which uses manipulated videos of Elon Musk to attract investors with promises of unrealistic returns. The regulator urged the Hong Kong Police Force to block access to related websites and social media pages. As of this week, these sites and Facebook groups have been taken down.

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Increase in deepfake fraud

Incidents involving deepfake technology have surged dramatically. In the Asia-Pacific region, deepfake-related fraud increased by an alarming 1,530 per cent last year, with Vietnam and Japan experiencing the highest number of attacks, according to a report by identity verification platform Sumsub.Penny Chai, Sumsub’s Vice-President of Business Development in APAC, noted that the high volume of digital financial transactions in emerging markets like Asia makes the region a lucrative target for deepfake scammers.

Details of the scam

The Quantum AI scam has been around for at least a year, recycling various iterations to target different groups. One video, debunked by PolitiFact, falsely depicted Musk and Jack Ma promoting the platform, using footage from the 2019 World AI Conference in Shanghai. Another video altered Musk’s appearance on Tucker Carlson’s Fox News show to endorse the scam.

Technological exploits and financial impact

Scammers use inexpensive hosting providers and flexible technologies like WordPress to create convincing websites. One prominent site requires a minimum deposit of $250 and advises users to invest only what they are prepared to lose completely.

Hong Kong has been identified as one of the top five markets in Asia for identity fraud, with a rate of 3.3 per cent last year. The rate of fintech fraud in Hong Kong increased by 216 per cent in the first quarter of this year compared to the same period last year, reflecting a rapid escalation in fraudulent activities.

High-profile deepfake incidents

Deepfake technology has already led to significant financial losses. In 2020, a Japanese bank manager was deceived by a fake audio mimicking his director’s voice, resulting in a $35 million transfer. Similarly, a multinational company lost $25.6 million through a deepfake video call that impersonated its chief financial officer.

Ongoing efforts and additional warnings

The SFC has been vigilant in flagging crypto-related scams, with 18 of the 29 warnings about suspicious virtual asset trading platforms issued this year alone. The JPEX scandal last September, involving a loss of approximately HK$1.5 billion ($192 million), remains one of the largest financial frauds in Hong Kong’s history.

Recently, the SFC also warned against an investment product called LENA Network, which involves cryptocurrency staking, borrowing, and lending. The regulator cautioned that staking arrangements might constitute unauthorised collective investment schemes and pose high risks.