Financial fraud is rising alongside the current AI-driven market boom. Cycles of rapid financial success tend to be followed by increased fraudulent activity, with companies likely to overpromise AI capabilities to attract investment. AI-enabled tools such as deepfakes are expected to exacerbate deception and make detection more difficult. Massive AI spending by major tech firms has materially boosted market indices and contributed to GDP growth, concentrating gains among top companies. Investor confidence in sustainable AI-driven returns is weakening, and only a small share of AI pilot programs have produced immediate measurable results.
In 2020, billionaire short-seller Jim Chanos told the Financial Times we were in the "golden age of fraud," a result, in part, of Silicon Valley's "fake it til you make it" attitude and a surge in eager retail investing as a result of the pandemic.
About five years later, as the AI boom balloons larger than the dotcom bubble of nearly 30 years ago, "we might be moving on to the diamond or platinum level" of fraud, he said.
"I haven't spent a lot of time on the technical side of AI-driven fraud-like deepfakes and similar tools-but it's pretty clear it's going to get worse," Chanos said in an interview this week with non-profit think tank Institute for New Economic Thinking. "When it comes to financial fraud specifically, there's no question we're seeing more of it-especially riding the wave of the current AI-driven market boom," he added.
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