AI-Assisted Fraud in Crowdfunding: How Scammers Exploit Loopholes in Digital Identity

In the rapidly evolving landscape of digital finance, crowdfunding has emerged as a powerful tool that enables entrepreneurs and creators to secure funding directly from the public. 

However, this innovation has also opened new avenues for fraudsters, particularly with the advent of artificial intelligence (AI). 

AI-assisted fraud in crowdfunding exploits digital identity loopholes and poses significant challenges to both platforms and users.​

The rise of AI-assisted fraud in crowdfunding

AI technologies, while offering numerous benefits, have also been used by malicious actors to perpetrate sophisticated scams. 

The 2025 Identity Fraud Report by Entrust highlights a surge in AI-driven fraudulent activities, including synthetic identity fraud, deepfakes, and fraud-as-a-service platforms. The top five most targeted industries are related to financial services.

These tools enable scammers to create convincing fake identities and manipulate digital content. This is why it becomes increasingly difficult to distinguish between legitimate and fraudulent campaigns.​

Common types of crowdfunding fraud

Understanding the various forms of fraud is important to develop effective countermeasures. Here are the main fraud types.

1. Synthetic identity fraud

Synthetic identity fraud is one of the fastest-growing frauds out there. The Deloitte Center for Financial Services projects that synthetic identity fraud will lead to at least $23 billion in losses in the United States by 2030.

Fraudsters create fictitious identities by combining real and fake information. They use these identities to launch crowdfunding campaigns, collect funds, and disappear without delivering promised products or services.

AI-generated deepfakes can produce realistic images and videos of individuals who endorse or promote campaigns. These fabricated endorsements can mislead backers into supporting fraudulent projects.

For instance, in 2024, scammers used deepfake videos of celebrities like Elon Musk to promote fake investment schemes, defrauding victims of millions.​

3. Fraud-as-a-Service platforms

Information and services that support fraud are widely available on the dark web. These include hacking tutorials, step-by-step guides, and even full cybercrime courses. Criminals can also buy stolen personal data like login details, Social Security numbers, and credit card information. For example, a 2023 study found that a credit card with a $5,000 balance could be bought for just $110.

Because most of this activity happens in hidden corners of the internet, it’s difficult to measure how widespread and damaging it truly is. 

4. Misappropriation of funds

In some cases, campaign creators misuse the funds raised for personal expenses rather than the stated project goals. This breach of trust undermines the credibility of crowdfunding as a whole. 

A notable case is the iBackPack scam, where the creator raised over $800,000 on Kickstarter and Indiegogo, promising a technologically advanced backpack. However, the funds were reportedly used for personal expenses, leading to legal action by the FTC.

5. Fake crowdfunding platforms

One of the more deceptive forms of AI-assisted fraud involves the creation of entirely fake crowdfunding websites designed to resemble legitimate platforms. These counterfeit sites often copy the branding, layout, and user interface of well-known crowdfunding services such as Kickstarter, Indiegogo, or GoFundMe, making it extremely difficult for the average user to spot the difference. 

In some cases, fraudsters go so far as to clone entire campaigns from real platforms and present them as active fundraising efforts on their fake sites. The goal is simple: to lure unsuspecting contributors into donating money to what appears to be a credible project.

Mitigation strategies

A multifaceted approach is needed to address AI-assisted fraud. As the tools used by scammers become increasingly sophisticated, so too must the mechanisms for detection and prevention. Here are some mechanisms that will help to protect users from scams.

Multi-factor authentication and biometric verification

To ensure that only legitimate individuals are permitted to launch campaigns, platforms must implement robust identity verification processes. Multi-factor authentication, such as combining something the user knows (like a password), something the user has (like a phone), and something the user is (like a fingerprint or facial recognition), creates a more secure verification mechanism. Biometric verification, in particular, can reduce the risk of synthetic identity fraud by requiring real-time, verifiable physical presence during account creation and campaign approval.

AI-powered fraud detection

Artificial intelligence should not only be viewed as a tool for fraud but also as a way to protect users against it. Advanced machine learning models can analyze behavioral patterns, transaction histories, and metadata to detect anomalies that suggest fraudulent activity. By flagging inconsistencies in real time, such as unusual funding velocity, geographic mismatches, or AI-generated content, platforms can proactively stop scams before they escalate.

User education and due diligence

It is easier to prevent scams if users are informed. Platforms should invest in clear, accessible educational resources that help users identify red flags in crowdfunding campaigns. This includes guidance on how to verify campaign creators, analyze project credibility, and avoid emotionally manipulative content. Encouraging contributors to perform due diligence before making a financial commitment can significantly reduce the success rate of fraudulent campaigns.

Stronger regulatory oversight and platform accountability

Governments and regulatory authorities must establish and enforce guidelines that hold platforms responsible for fraud prevention. This includes mandating transparency in campaign operations, requiring disclosure of identity verification methods, and enabling swift legal action against bad actors. Regulatory bodies should also work in partnership with crowdfunding platforms to create industry standards that ensure consistent, reliable fraud prevention measures across the board.

Launching a safe crowdfunding platform with LenderKit

In an era where AI-assisted fraud is becoming increasingly sophisticated, launching a secure and compliant crowdfunding platform requires more than just a good idea. It demands robust technology, strong regulatory alignment, and a proactive security framework. This is where LenderKit stands out as a trusted white-label crowdfunding software provider.

With built-in KYC/AML integrations, investor verification tools and customizable workflows, LenderKit helps you establish a crowdfunding platform that prioritizes user safety and compliance from day one. The system supports multi-factor authentication, audit trails and secure payment gateways, all designed to help mitigate the risks of identity fraud and financial misconduct.

LenderKit is built with regulatory readiness in mind, making it easier to meet local and international requirements for equity, lending or real estate crowdfunding models.

To find out details and see how the product works, please get in touch with our team.