Author: Harshita Maheshwari
College: Jagannath University, Jaipur
To the Point
Artificial Intelligence (AI) has changed the way people work, communicate, and do business. While AI offers many benefits, it has also created new opportunities for cybercriminals. Today, fraudsters use AI to create fake videos, voices, images, and messages that appear genuine. These technologies are often used to trick people into making investments, transferring money, or sharing confidential information.
Deepfake technology can imitate a person’s face or voice so realistically that victims often believe they are dealing with a trusted individual. Investment fraud has also become more sophisticated, with AI generated advertisements, fake celebrity endorsements, and convincing customer reviews encouraging people to invest in fraudulent schemes.
The law is trying to keep up with these new forms of crime. Governments across the world are introducing rules to regulate AI while using existing cybercrime, fraud, and consumer Protection laws to punish offenders.
Use of Legal Jargon
➢ Artificial Intelligence (AI)
➢ Deep Fake
➢ Investment Fraud
➢ Cybercrime
➢ Identity Theft
➢ Misrepresentation
➢ Mens Rea
➢ Actus reus
➢ Due diligence
➢ Data Protection
➢ Civil liability
➢ Misappropriation
➢ Criminal Liability
➢ Electronic evidence
The Proof
Artificial Intelligence has become an integral part of modern life. It assists businesses in decision-making, automates routine tasks, and enhances customer experiences. Nevertheless, cybercriminals are using the same technology to commit highly organized financial crimes.
Investment scams are no longer limited to fake emails or phone calls. Today, criminals use Artificial Intelligence (AI) to create fake videos of famous investors, politicians, and business leaders. These videos make it appear as if these people are recommending fake investment websites or apps. Many people believe these videos are real and invest their hard earned money, which often leads to huge financial losses.
Another growing problem is deep fake scams. In these scams, AI is used to create fake voices or videos that look and sound like real people. For Example, fraudsters may copy the voice of a company’s director and ask an employee to transfer money, or create fake videos of celebrities promoting cryptocurrency or other investment schemes. These new methods of fraud create serious legal and ethical concerns because they are difficult to detect and can easily mislead people.
Understanding Deep Fake technology
A Deep Fake is an AI-generated image, audio recording, or video that convincingly imitates a real person’s appearance or voice. Machine learning models analyze large datasets of photographs, videos, or speech samples to create highly realistic digital content.
While deep fakes have legitimate uses in filmmaking, education, accessibility, and entertainment, their misuses has become a growing concern. Common Examples include AI-generated voice calls requesting emergency money transfers, fake social media Advertisements promoting cryptocurrency investments and AI- generated customer support representatives convincing victims to disclose banking credentials.
AI-Driven Investment Fraud
Earlier, investment fraud mainly involved false promises of high returns. Today, AI has made these scams more convincing and harder t detect.
Common Methods
1. Celebrity Deep fake Advertisements – Scammers use AI to create fake videos of celebrities promoting investment schemes. People often believe these videos are real and invest their money.
2. Executive Voice Cloning- Fraudsters copy the voice of a company executive using AI. They then call employees and ask them to transfer money to fake bank accounts.
3. AI Chatbots – Scammers use AI chatbots that acts like professional financial advisors. These chatbots give personalized investment advice to gain the trust of victims.
4. Fake Trading Platforms – criminals create fake investment websites using AI. These websites show false profits to convince people to invest more money before the scammers disappear.
5. Social Engineering – AI collects information from a person’s online activities and social media. Scammers use this information to send personalized investment offers that look genuine and trustworthy.
Legal Framework in India
1) Information Technology Act, 2000 : The IT Act remains India’s principal legislation governing cyber offences. Relevant provisions include Section 66C in which punishes identity theft involving passwords, digital signatures, or electronic identification , Section 66D in which punishes cheating by personation using computer resources and Section 72 in which protects confidentiality and privacy of electronic information. These provisions apply where AI is used to impersonate individuals or commit online fraud.
2) Bharatiya Nyaya Sanhita, 2023 (BNS) : Relevant provisions include offences relating to cheating, Criminals breach of trust , forgery, forged electronic records, personation and criminal conspiracy. Where deep fake content is used to deceive investors, these offences may attract criminal liability.
3) Bharatiya Sakshya Adhiniyam, 2023 : The BSA recognizes electronic records and digital evidence, making AI generated videos, emails, metadata, server logs and forensic reports admissible subject to statutory requirements.
4) SEBI Regulations: The Securities and Exchange Board of India protects investors against fraudulent investment schemes by regulating securities markets, preventing misleading advertisements, taking enforcement action against unauthorized investment advisors.
5) Digital Personal Data Protection Act, 2023: Unauthorized collection and misuse of Personal data used for AI impersonation may also attract liability under India’s data protection framework.
Challenges in Investigations
Deep fake crimes present several investigative difficulties:
• Identifying anonymous cybercriminals.
• Cross-border digital transactions.
• Cryptocurrency payments.
• Rapid deletion of electronic evidence.
• Difficulty distinguishing genuine and AI- generated content.
• Lack of forensic expertise.
• Jurisdictional complications involving foreign platforms.
Global Response
Several Jurisdictions are introducing AI specific regulation.
• The European Union AI Act adopts a risk-based approach to regulate high-risk systems.
• The United States has proposed multiple federal and state initiatives targeting AI-enabled election interference and consumer fraud.
• International agencies such as Interpol and financial regulators are strengthening cooperation to combat AI- enabled cybercrime.
India may similarly benefit from dedicated legislation addressing malicious AI-generated content.
Ethical Concerns
The misuse of AI raises significant ethical issues:
➢ Violation of Privacy
➢ Loss of Public trust
➢ Manipulation of financial decisions
➢ Damage to reputations
➢ Spread of misinformation
➢ Increased cybercrime
➢ Threats to democratic institutions and market integrity.
Balancing technological innovation with accountability remains essential.
Case Laws
1. Shreya Singhal V. Union of India
➢ The Supreme Court declared Section 66A of the Information Technology Act, 2000 unconstitutional because it violated the fundamental right to freedom of speech and expression under Article 19(1)(a) of the Constitution. The Court held that restrictions on online speech must be reasonable and fall within the grounds specified under Article 19(2). This judgment remains a landmark decision in protecting digital free speech while allowing regulation of genuinely unlawful online content.
2. K.S. Puttaswamy (Retd.) V. Union of India
➢ A nine-judge Constitution Bench unanimously held that the right to privacy is a fundamental right protected under Article 21 and other constitutional freedoms. The judgment established that individuals have a constitutional right to control their personal information, making it highly relevant in addressing AI-driven identity theft, facial recognition, biometric misuse, and deep fake technologies.
3. Anvar P.V. V. P.K. Basheer
➢ The Supreme Court ruled that electronic records are admissible as evidence only if they comply with Section 65B of the Indian Evidence Act, 1872(now reflected under the Bharatiya Sakshya Adhiniyam , 2023). The Court emphasized the need for a valid Section 65B certificate for electronic evidence. This principle is significant in cases involving AI-generated deep fakes, digital videos, and electronic communications.
4. Arjun Panditrao Khotkar V. Kailash Kushanrao Gorantyal
➢ The Supreme Court reaffirmed the decision in Anvar P.V. and held that a Section 65B certificate is mandatory for the admissibility of electronic evidence unless the original electronic device itself is produced before the court. The judgment strengthens the evidencing standards for digital material, including AI-generated images, videos, and voice recordings.
5. Amitabh Bachchan V. Rajat Nagi & Ors
➢ The Delhi High court granted an Interim Injunction protecting Amitabh Bachchan’s personality rights, restraining unauthorized commercial use of his name, image, voice, likeness, and other distinctive attributes. The Court recognized that misuse of a celebrity’s identity can cause irreparable harm. The decision has become increasingly significant in the age of AI- generated deep fake and voice cloning, reinforcing legal protection against digital impersonation.
Conclusion
Artificial Intelligence (AI) has the power to improve many areas of our lives, but when it is misused, it can create serious problems. AI-Powered investment fraud and deep fake scams can lead to financial losses, violate people’s privacy, and reduce public trust. These scams are becoming more advanced, making them harder to detect with traditional methods.
India already has several laws to deal with cybercrime and online fraud, such as the Information Technology Act, the Bharatiya Nyaya Sanhita (BNS), the Bharatiya SakshyaAdhiniyam (BSA), the Digital Personal Data Protection Act, and SEBI’s regulations. However, most of these laws were made before the rapid growth of modern AI, so they need to be updated to address new challenges.
To tackle AI- related fraud, India needs stronger laws, better cybersecurity, advanced digital investigation tools, effective regulatory oversight, and greater public awareness. The future of AI should focus on responsibility, transparency, and ethical use so that it continues to benefit society instead of being used for fraud and deception.
FAQs
Q1. What is Deep fake?
A deep fake is AI-generated audio, video, or image content that realistically imitates a person’s appearance or voice.
Q2. How are deep fake use in Investment fraud?
Fraudsters create fake endorsements by celebrities, business, or financial experts to convince people to invest in fraudulent schemes.
Q3. Which Indian laws apply to AI-enabled investment fraud?
Relevant laws include the Information Technology Act, 2000, the Bharatiya Nyaya Sanhita, 2023, the Bharatiya Sakshya Adhiniyam, 2023, the Digital Personal Data Protection Act, 2023, and applicable SEBI regulations.
Q4. Is deep fake technology itself illegal?
No, Deep fake technology has legitimate uses in entertainment, education, accessibility, and research. It becomes unlawful when used for fraud, impersonation, defamation, identity theft, or other illegal purposes.
Q5. What should a person do if they become a victim of an AI Investment scam?
Immediately report the incident to the National Cyber crime reporting portal or the Cybercrime helpline (1930), inform your bank to block or trace transactions where possible, preserve all digital evidence, and file a complaint with the appropriate law enforcement authorities.
Q6. Why is electronic evidence important in deep fake cases?
Digital evidence such as metadata, device logs, transaction records, and forensic reports helps establish the authenticity of electronic records and identify the individuals responsible for AI- enabled fraud.
