A US state securities regulator is set to propose a strategy to protect Americans from a surge in digital asset fraud driven by increasingly sophisticated artificial intelligence tools.

Claire McHenry, Nebraska Department of Banking and Finance (NDBF) deputy director and president of the North American Securities Administrators Association (NASAA), is set to present her testimony before the Securities and Exchange Commission (SEC) Investor Advisory Committee on March 6.

McHenry’s testimony will highlight a significant increase in digital asset fraud, with scammers leveraging AI, social media and cryptocurrency ATMs to exploit retail investors in America, especially seniors.

NASAA 2024 enforcement report. Source: SEC

Crypto scammers target American retail investors

McHenry cited an uptick in crypto-related financial fraud in the US, saying in her prepared remarks that “the NASAA Enforcement Report is a good indicator of what retail investors are experiencing.”

According to NASAA’s 2024 Enforcement Report, digital assets were cited more frequently in investigations and enforcement actions than any other financial product or scheme, including stocks, Ponzi schemes, internet-based fraud and promissory notes.

Most frequently cited products and schemes. Source: NASAA 

McHenry’s testimony states:

“States continue to see a growing number of complaints, investigations, and enforcement actions involving digital assets. [...] This year, the survey results showed more investigations and actions tied to digital assets than any other product or scheme.”

AI tools are playing a key role in making “scams more believable,” she said, urging regulators to shift away from relying on “tips and tricks” and instead “emphasize media literacy.”

Renewed focus on older investors and crypto ATMs

Most financial fraud and scams involve the use of cryptocurrency ATMs. Scammers often try and convince victims to deposit cash into crypto ATMs and collect it in the form of cryptocurrencies. According to McHenry, victims of financial fraud are sensitive to how the scams are perceived, which may prevent many from reporting such crimes:

“Using victim-blaming language can be unintentional, but harmful. We should put the blame where it belongs – on the perpetrator and not the victim – to rebuild confidence and encourage reporting.”

Related: Crypto ATM network shrinks as US loses 1,200 machines in days

In Nebraska, 98% of the money sent through one cryptocurrency ATM company were scam transactions.

McHenry’s testimony also underscores the disproportionate impact of crypto fraud on older Americans, primarily in relation to tech support scams and investment scams.

Older Americans are more susceptible to crypto scams. Source: NASAA

“These (older) investors are tempting targets as they have accumulated wealth over their lifetimes but may lack the technological savvy needed to detect and avoid scams.”

Her testimony highlights how evolving technology and financial innovations are making fraud prevention more complex. She stressed the need for regulatory collaboration, stronger AI fraud detection and improved investor education to protect Americans from AI-driven and crypto-related fraud.


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