The AI Arms Race in Fraud Detection – Who’s Really Winning?

By Dr. Pooyan Ghamari Swiss Economist and Visionary

Right now, somewhere in Eastern Europe, a red-team LLM is writing tomorrow’s $200 million scam. Across the planet, a blue-team LLM is trying to predict it before the prompt is even finished. Both models were released the same month, trained on nearly the same data, and cost roughly the same to run. One of them is going to lose — and so are you if you picked the wrong side.

Welcome to 2025’s silent war: fraud-AI versus defense-AI. It is asymmetric, exponential, and already decided in places we cannot see.

The Scoreboard So Far (November 2025)

For the first time in history, the defenders occasionally win big, but the attackers no longer need to win often — one $500M hit pays for ten thousand failed attempts.

The Three Tribes Fighting This War

1. The Attack Labs (mostly anonymous, decentralized)
   • 400–600 elite prompt engineers and ex-NSA mathematicians
   • Funding: direct skim from successful scams + Russian/SEA cybercrime cartels
   • Advantage: zero compliance overhead, can release malicious models instantly
   • Current crown jewel: “DarkGPT-5” – a 500B uncensored model fine-tuned exclusively on 2021–2025 fraud playbooks
2. The Regulated Defenders (Chainalysis, Elliptic, Fortune-100 banks, Singapore MAS, FedWire)
   • Thousands of PhDs, unlimited compliance budget
   • Handicap: every new model must go through 6–18 months of audit, explainability reports, and model cards
   • Current crown jewel: “Sentinel-4” – finally allowed to deploy after 14 months of regulatory sandbox
3. The Rogue Defenders (a handful of semi-legal startups in Dubai, Gibraltar, and Estonia)
   • They train on the exact same dark-web datasets as the attackers
   • They release weekly, sometimes daily
   • They are currently the only ones consistently detecting DarkGPT-5 patterns before the first dollar moves
   • Every regulator wants them shut down; every major exchange quietly pays them seven figures under “threat intelligence” contracts

The Moment the Defenders Almost Won

August 2025 – Operation Phoenix A coalition of rogue defenders + MAS + Chainalysis used a never-before-seen technique: they poisoned the attacker’s training set.

By flooding private Discord and Telegram channels with millions of fake “successful” scam transcripts containing subtle honeytokens, they caused two major fraud models to internalize self-destruct patterns. When those models later generated real campaigns, every transaction included a dormant flag that lit up across 41 blockchains simultaneously.

Result: $340 million frozen in mixer inputs within 11 minutes — the largest single-day seizure in crypto history.

The celebration lasted exactly 9 days. The attackers simply rolled to a new model trained on clean data bought from a different broker. Game continued.

Why Pure Defense Is Mathematically Doomed

Every legitimate detection model must be explainable to regulators → slower release cycle → attackers always have the newer architecture. Every false positive costs a bank millions in frozen legitimate customer funds → defenders are forced to keep detection thresholds conservatively high → attackers operate underneath the noise floor.

In other words, the attackers have turned regulation itself into their moat.

The Only Strategy That Is Currently Winning

Hybrid rogue defense + privacy-preserving federation.

A new protocol emerged in Q4 2025: decentralized threat-intelligence networks that share only cryptographic hashes of detected malicious prompts and contract patterns — never the full model or raw data. Participants include three top-20 exchanges, two rogue startups, and one G20 central bank that shall remain unnamed.

They update detection signatures every 40 minutes. They have stopped 68% of all 2025 deepfake-CEO attacks at the exact moment the malicious calldata is broadcast — before the victim even clicks “Approve.”

No single participant could do this alone. Together they move faster than any regulated entity and faster than most attacker squads.

The 2026 Prediction

One of four things will happen:

1. Regulators legalize and fund the rogue defenders → defenders pull ahead permanently.
2. Regulators crush the rogue defenders → attackers achieve near-total dominance by 2027.
3. The hybrid federations stay in the gray zone and quietly become the de facto immune system of global finance.
4. Nation-states enter the game with classified models → everything breaks and we enter a new dark age of trust.

My money is on number 3 — for now.

The fraud-AI arms race is not a fair fight. It never was. The winner will be whichever side learns to weaponize cooperation faster than the other side weaponizes isolation.

Place your bets accordingly.

Dr. Pooyan Ghamari Swiss Economist and Visionary November 2025