Artificial intelligence is playing a significant role in fueling a surge of cryptocurrency fraud schemes that have swindled millions from unsuspecting victims, according to IRS criminal investigators. One victim, Kyle Holder, lost nearly $300,000 in retirement savings after being manipulated by scammers who used AI-driven tactics to gain her trust and defraud her.
Holder, 73, a former occupational therapist, first received a message via WhatsApp around Christmas 2024 offering coaching on crypto investments. The scammer, posing as a single mother named Niamh, built a relationship with Holder before coaching her to transfer funds into multiple cryptocurrency wallets. Over nearly three months, Holder unknowingly sent almost $300,000 to 14 different wallets controlled by the criminals. When Holder expressed concern about missing returns, the scammers escalated their deception with intimidation, ultimately wiping out her life savings.
The IRS Criminal Investigation unit’s New York Field Office mapped the scheme, revealing how the stolen crypto was moved through multiple wallets and exchanges to obscure its origin, consolidating millions of dollars that criminals have so far evaded law enforcement. Special Agent Harry Chavis explained that the perpetrators likely leveraged AI tools available on the dark web to target victims precisely and automate their scams.
“These dark AI tools” allow criminals to access and exploit hacked or leaked data, including lists of prior victims, to target individuals with customized messages and scripts, making scams more convincing and difficult to detect, Chavis said.
Holder’s experience illustrates the devastating personal impact of these high-tech fraud operations. After losing her savings, Holder struggled with depression and had to move into an assisted living facility paid for by Medicaid. “I wanted to have something to leave to my children but there’s nothing left,” she said.
Why it matters
The rapid growth of AI-enabled fraud complicates efforts to trace and recover stolen funds, as criminals use sophisticated laundering techniques involving cryptocurrency wallets and exchanges worldwide. The IRS Criminal Division has established an online tipline to receive reports on these cases, urging victims to come forward promptly for a better chance of identifying perpetrators.
Investigators warn the best defense is vigilance and caution, advising individuals to verify unsolicited investment offers independently and avoid hastily clicking on links or sending money. The use of AI to automate and personalize scams is expected to increase, making public awareness and timely reporting crucial.
Background
Cryptocurrency fraud has been a growing problem, with the FBI estimating $20 billion lost to cyber theft in 2025, more than half of which involved digital currency. The anonymity and decentralized nature of crypto make it an attractive vehicle for money laundering. Previously, scams relied heavily on social engineering alone, but the integration of AI now allows scammers to craft highly convincing narratives, automate communications, and exploit stolen personal data with unprecedented precision.
Holder’s case is part of a larger wave of fraud impacting thousands of Americans, demonstrating how emerging technologies like AI are reshaping the criminal landscape and posing new challenges for law enforcement and cybersecurity.
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