The threat to investors posed by AI scams, ‘Razzlekhan’ gets jail sentence after Bitfinex hack, Switzerland crypto warning
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From Paul O'Donoghue at AMLi
The rise of AI has led to something of a frenzy among investors, as they scramble to grab a piece of the next big thing.
While much of the hype has come from genuinely promising businesses, it has also given scammers a major opportunity to cash in.
That is exactly what U.S. prosecutors claim happened in two cases which were announced this week.
The cases should serve as reminders to investors interested in hot AI companies hyped to the moon - be careful.
AI SCAMS
ALLHERE: The first is perhaps more notable due to the profile of those involved - Joanna Smith-Griffin was heralded as one of the young new leaders in AI.
It was hoped that the AI chatbot designed by her startup AllHere Education would play a major role in reducing student absenteeism.
So promising was the technology, that Smith-Griffin was featured in Forbes magazine's “30 Under 30” list of leaders in the education field in 2021.
However, AllHere looks to have been built on sand. U.S. prosecutors have charged Smith-Griffin with defrauding investors, claiming she falsified the company’s financials and client base.
To give an idea of the scale of the alleged fraud - prosecutors say Smith-Griffin inflated AllHere’s 2020 revenue to $3.7 million, when it was actually $11,000.
She is also accused of falsely listed major school districts, including the New York City Department of Education, as clients.
FLOWERS: In a similar vein, but at an even greater scale, are the alleged crimes of AI portfolio manager Kaner Flowers.
He has been arrested in the U.S. after being accused of stealing investor funds and falsely inflating the value of his fund.
An indictment claims that from 2020 to 2023, Flowers managed an AI fund, which he falsely claimed had assets worth billions of dollars. In reality, the fund never held more than $3.5 million.
It’s also alleged that Flowers stole from the fund, including using $70,000 in October 2021 to pay a personal loan. In addition, he is accused of transferring over $200,000 to himself between December 2021 and January 2022.
If convicted, Flowers faces up to 20 years for securities and wire fraud, and 10 years for money laundering.
CRYPTO ROUNDUP
BITFINEX: 2016 saw one of the biggest security breaches in crypto history, when 120,000 Bitcoins were stolen from the Bitfinex exchange.
Worth about $72 million at the time, the value of the stolen currency has since soared to several billion dollars.
A key couple emerged at the heart of the case - Ilya Lichtenstein and his wife, Heather R. Morgan, a rapper and influencer known by her online persona of "Razzlekhan".
Authorities said the couple laundered about 20% of the stolen bitcoin.
The pair were federally charged in February 2022 with conspiring to launder the stolen Bitcoin - their cases both wrapped up during the week.
Lichtenstein, who carried out the hack, was sentenced to five years in prison.
Morgan was sentenced to 18 months in prison for laundering some of the proceeds.
She has already posted on social media following the conclusion of the case, where she hinted at plans to share her side of the story.
FINMA: Out with a well-timed warning on the risks cryptocurrencies pose in money laundering was Switzerland’s FINMA regulator.
The financial watchdog said it was specifically concerned about the use of stablecoins. These are cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, such as the U.S. dollar.
FINMA said that cryptocurrencies are often used in cyberattacks or as a means of payment for illegal trading on the dark web.
“Some analyses have also shown a big rise in the use of stablecoins for illicit transactions, particularly in relation to sanctions evasion,” the regulator said.
ANNOUNCEMENT: Dates for fast-growing European Anti-Financial Crime Summit confirmed – Dublin, May 7
‘EUROPEAN Anti-Financial Crime Summit 2025′ (EAFCS 2025), hosted by AML Intelligence, is set to return to Dublin on May 7 next, it’s been confirmed.
EAFCS is a key platform for top executives from banks, financial institutions, tech companies, regulators, and policymakers to discuss the most pressing issues in anti-financial crime.
The summit, which has become one of the most significant events on the European calendar, offers attendees the chance to hear from high-profile speakers and network with influential decision-makers in the field.
SEIZURE: Finally, two people suspected of being part of an international money laundering operation have been arrested in Ireland.
During a raid in an affluent area of south Dublin, authorities seized over €3.25 million in cryptocurrencies.
The man and the woman can be held for up to a week as they are questioned by police.
Following complaints from several international organizations, Irish police launched an investigation to examine the suspected use of bank accounts as ‘money mules’ for transferring criminal proceeds.
An investigation team identified suspicious transactions involving hundreds of bank accounts from over 15 European countries.
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Stephen and the team at AMlintelligence.
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3 天前As a Swiss fintech leader, I'm seeing AI-driven financial fraud becoming increasingly sophisticated - it's crucial for our ecosystem to stay ahead. How are other Swiss financial institutions balancing innovation with robust security measures? Looking forward to deeper collaboration between traditional banks and fintech companies to create a more resilient financial system. ??