AI Is Supercharging Cryptocurrency Scams, IRS Investigators Warn
Digital fraud has never been as sophisticated — or as terrifying — as it is right now. And the case of Kyle Holder, a 73-year-old retired occupational therapist who lost every penny of her life savings, brutally illustrates how the combination of artificial intelligence and cryptocurrency is creating a perfect storm for global cybercrime.
In 2025, Americans lost roughly $20 billion to online scams, according to FBI data. That number alone should be enough to set off alarm bells for anyone. But what truly stands out is not just the volume of money lost — it is the speed at which these scams are evolving and the surgical precision with which victims are selected and targeted.
More than half of that money vanished into the world of cryptocurrency. The reason is simple: crypto transactions are fast, hard to trace, and in most cases, irreversible. Once the money is gone, it is gone. There is no bank to call for a chargeback. No insurance to cover it. No way back.
And what is behind this staggering jump in numbers? Artificial intelligence falling into the wrong hands. 🤖
Investigators at the IRS Criminal Investigation Division are sounding the alarm: AI tools, available even on the dark web, are being used by criminals to craft ultra-personalized approaches, deceive victims with conversations that feel completely real, and move money in ways that are nearly impossible to trace. What once required a team of experienced scammers can now be pulled off by a single person with a laptop and the right tools — and those tools are getting cheaper and more accessible by the day.
The real-world impact of all this has a name and a face. Kyle Holder, 73, lost nearly $300,000 — decades worth of savings, including retirement and savings accounts — in less than three months. It was not carelessness. It was a surgical scam, built message by message, with patience and technology on the criminals’ side. Understanding how this scam worked is one of the most important ways to protect yourself today. 👇
How AI Became Cybercrime’s Favorite Weapon
For a long time, digital scams were easy to spot: spelling errors, generic pitches, far-fetched stories, and suspicious links. Anyone paying even a little attention could tell something was off. But that landscape changed dramatically with the rise of generative artificial intelligence tools. Today, a criminal can create fluid, personalized, and emotionally engaging conversations in any language, with any tone, adapting each message to the victim’s profile in real time — without a single grammatical mistake.
What IRS investigators are reporting is that organized cybercrime is no longer relying solely on human skills to scale operations. According to Harry Chavis, the special agent in charge of the IRS Criminal Investigation New York field office, AI tools available on the dark web allow scammers to automate the initial approach with victims, analyze emotional responses, and adjust their tactics as the conversation progresses.
In practice, this means a single operator can maintain dozens — or even hundreds — of simultaneous conversations with potential victims, each one receiving personalized attention and responses that feel genuine and human.
Chavis explained to CBS News that criminals can access dark web marketplaces where they find lists of previous scam victims, personal data obtained through breaches and hacks, and AI tools specifically designed to create targeted scripts for each individual mark. It is a complete digital crime ecosystem, powered by cutting-edge technology.
On top of that, AI is also being used to create extremely convincing fake identities. AI-generated photos, profiles with social media activity histories, digitally forged documents, and even synthetic videos — known as deepfakes — are all part of the modern scammer’s toolkit. When a victim searches the name of the person they have been chatting with and finds an apparently real profile, complete with photos, posts, and connections, the barrier of suspicion drops significantly. That is exactly the point where the scam really starts to work.
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The Scam That Destroyed Kyle Holder’s Retirement
Kyle Holder’s case is one of the most emblematic — and devastating — examples of how this type of fraud operates in practice. It all started around Christmas 2024, when a message popped up on Kyle’s WhatsApp. She used the app to communicate with family and friends across the United States, Canada, and Israel, so receiving messages there was completely normal for her.
The message offered guidance on how to invest in the cryptocurrency market. Kyle, who had worked as an occupational therapist for years but had to stop due to an injury, saw it as a real chance at a fresh start.
I thought maybe this was a way to use my time, start something new, and earn money to support myself in the years ahead, Kyle told CBS News, sitting on a park bench near the assisted living facility where she had to move after losing everything.
The meticulous building of trust
When Kyle responded to the message asking for more information, a person who introduced herself as Niamh entered the picture. And here is where the most disturbing part of the scam begins: Niamh did not go straight to the money talk. She first showed interest in Kyle’s life. She asked about her daily routine, her family, her plans. She said she was a single mother — and Kyle, who was also a single mother, felt an immediate connection.
The morning messages were warm and personal. Dear, how did you sleep last night? Any plans for the day? — Niamh would write, always alternating personal questions with subtle check-ins about financial transfers. It was a calculated rhythm between affection and objective, designed to keep Kyle emotionally engaged and financially active at the same time.
Kyle genuinely believed she had made a friend. And that manufactured friendship was the foundation on which the entire scheme was built.
The mechanics of the crypto scam
With trust established, Niamh and a second person — introduced as a member of a customer service team — began guiding Kyle through the process of opening two online cryptocurrency wallets. The process felt professional and organized. Kyle transferred a small initial amount to a crypto account linked to the scammers, and almost immediately, thousands of dollars appeared in her digital wallet.
This is a classic tactic in these kinds of scams: showing quick returns early on to create the illusion that the investment is real and profitable. The victim sees the money growing on the screen, feels confident, and decides to invest more. That is exactly what happened with Kyle.
Niamh even assured her that the team would handle the tax payments on her gains — another detail that added an extra layer of legitimacy to the scheme. Kyle thought she had found a real, trustworthy investment opportunity.
But the money appearing in Kyle’s wallet was never real. It was just a simulation — numbers on a screen controlled by the criminals. Meanwhile, the transfers Kyle was making were absolutely real — and irreversible.
When manipulation turned into intimidation
At a certain point, Niamh asked for personal financial help, appealing to the emotional bond she had built. She said the borrowed money included child support for her daughter Alice and even funds obtained through loans. It was a scam within a scam — using Kyle’s empathy to extract even more money.
Kyle ended up transferring nearly $300,000 to 14 different wallets linked to the scammers over the course of weeks. When she stopped seeing any returns flowing back into her wallets, serious worry set in.
Please assure me this is not a scam, Kyle wrote to Niamh. And the response she received was calculated to keep her trapped in the cycle: Niamh said Kyle had sent money to the wrong wallet and blamed her for the supposed mistake.
You made a fatal mistake, Niamh wrote in a message two months after the first contact. The warm tone had completely vanished. The WhatsApp messages turned intimidating.
When Kyle finally understood what had happened — that all her savings, accumulated over decades of work, had disappeared — the impact was devastating. She reported that she no longer wanted to live. She spent weeks unable to get out of bed. Social services were called to check on her, and eventually police took her to a local hospital. Social workers arranged for Medicaid to cover her transfer to an assisted living facility on Long Island, where she now shares a small room with another person.
I wanted to have something to leave for my children, but there is nothing left, Kyle said. 💔
How Investigators Traced the Money
Kyle’s case was referred to the IRS Criminal Investigation New York field office, where special agents mapped out the complete anatomy of the scam. What they found reveals the level of sophistication these schemes have reached.
The criminals transferred the cryptocurrency from the 14 wallets Kyle sent money to into five new wallets, mixing the amounts to make any tracing more difficult. From there, the money moved to a cryptocurrency exchange — the so-called off-ramp, the point where digital assets are converted into traditional currency.
According to Chavis, Kyle’s money was consolidated with funds from other victims. In total, the criminals managed to move more than $5 million in cryptocurrency through this scheme without being identified. Kyle’s contribution of nearly $300,000 was just a fraction of the total volume the scammers accumulated in a final wallet.
This process of mixing funds from multiple victims into the same chain of wallets is a deliberate strategy to make tracing exponentially harder. Each additional layer of transfers creates more nodes for investigators to untangle, and time works in the criminals’ favor — the longer it takes for a victim to report, the further away the money gets.
Chavis’s team of special agents is still trying to identify other victims of the same scheme that targeted Kyle. As of now, the criminals responsible have not been identified. As Chavis noted to CBS News: they could be anywhere in the world.
Why Cryptocurrency Is Scammers’ Preferred Target
It is no coincidence that more than 50% of losses from digital scams involve cryptocurrency. This technology, which was born with the promise of decentralizing the financial system and giving users more autonomy, has also created an environment that is extremely favorable for anyone looking to move money without leaving easy-to-follow trails. Blockchain transactions are public, but the identities behind the wallets are, in most cases, anonymous. This makes the investigative work far more complex and time-consuming — time that criminals use to scatter values across dozens of different wallets before any effective tracing is even possible.
Beyond the relative anonymity, the irreversibility of transactions is another factor that favors fraud. In the traditional banking system, a suspicious transfer can be blocked, reversed, or disputed within a timeframe. In crypto, once a transaction is confirmed on the network, there is no native mechanism to undo it. This puts the victim at an enormous disadvantage: by the time they realize the scam, the window to act has already closed. Criminals know this and exploit this feature systematically, pressuring victims to act quickly during the transfer process so there is no time for second thoughts.
The emergence of artificial intelligence tools for analyzing and moving crypto assets is also adding sophistication to the money laundering layer in these schemes. Algorithms can identify tracking patterns used by investigators and distribute values in ways that make the authorities’ work even harder. The result is that money disappears with near-surgical precision, passing through a series of wallets and exchanges before being converted into other forms of value or cashed out in regions with less regulatory oversight.
Red Flags You Need to Know
The good news — and yes, there is some — is that even the most sophisticated scams leave clues. Knowing the behavioral patterns behind these frauds is one of the most effective ways to avoid falling for them. Here are the key red flags:
- Unsolicited contact: someone you do not know starts a conversation, often through what appears to be an accidental message, and gradually develops a relationship over days or weeks. The approach is always friendly, never aggressive — after all, the goal is to build trust before anything else.
- Investment opportunities that come out of nowhere: when someone you recently met starts talking about extraordinary returns on obscure platforms, that is a major red flag. Legitimate investment platforms are not discovered by chance in casual conversations — they are researched, evaluated, and regulated.
- Artificial urgency: pressure to make financial decisions quickly, claims that the window of opportunity is closing, or assertions that you need to transfer money right now to secure your spot are hallmarks of these scams.
- Returns that seem too good to be true: if the numbers appearing on screen seem unrealistic, they probably are. Scammers use fake platforms that simulate growing profits to keep the victim engaged and investing.
- Requests to transfer funds to unknown cryptocurrency wallets: any request to send crypto to addresses provided by people you met online should be treated with extreme caution.
Harry Chavis of the IRS emphasized to CBS News that the most important response to any suspicious communication is to slow down. Verify directly with the entity or person who is supposedly reaching out before clicking any link or making any transfer. The urgency to act without thinking twice is exactly what criminals want to trigger — and resisting that impulse can be the difference between keeping your savings safe or losing them forever.
What to Do If You Have Been a Victim
Investigators are emphatic on one point: the sooner the victim reports, the greater the chances of identifying those responsible and, in some cases, recovering part of the funds. The IRS Criminal Investigation Division recently launched an online channel for reporting cases like Kyle Holder’s.
Chavis made a point of delivering a message to anyone in this situation: do not be ashamed. These are highly sophisticated scams and anyone can become a victim. That is a truth that needs repeating, because the shame and social stigma surrounding falling for scams often prevent victims from seeking help — and that silence is exactly what criminals rely on to keep operating undetected. 🛑
In addition to reporting to authorities, it is essential to document all conversations, screenshots, cryptocurrency wallet addresses involved, and any detail that could help the investigation. Every piece of information could be the missing link that connects one scam to a larger criminal network.
A Warning for Everyone
Kyle Holder’s case is not an isolated one. She is one of thousands of Americans who lost everything in 2025 to scams that combine artificial intelligence, social engineering, and cryptocurrency. And the problem is not limited to the United States — similar schemes are spreading around the world, including in countries where the growing use of messaging platforms and rising interest in crypto assets create fertile ground for this type of crime.
The technology that allows AI to create conversations indistinguishable from real human interactions is the same technology making these scams virtually undetectable to the average person. We are no longer talking about clumsy cons that anyone would spot — we are talking about sophisticated, well-funded, and technologically advanced operations run by criminal networks that could be operating from anywhere on the planet.
If something sounds too good to be true in the world of cryptocurrency, it almost always is. And if someone you have never met in person is asking you to transfer money — no matter how convincing the story — stop, breathe, and verify before you act.
Your life savings do not deserve to become a statistic. 🔒
