European Cybersecurity Startups Race to Combat Deepfake Fraud Epidemic as Losses Top €1.3 Billion

Deepfake Fraud Reaches Crisis Levels

European cybersecurity startups are accelerating development of deepfake detection technologies as reported losses linked to synthetic media fraud have surpassed €1.3 billion, according to a recent study by Dutch cybersecurity firm Surfshark. Sources indicate that €860 million was stolen in 2025 alone, representing a €500 million year-on-year increase as AI-powered deception becomes increasingly sophisticated and accessible.

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Analysts suggest the crisis stems from the collapsing cost of creating convincing synthetic media. Where producing a one-minute deepfake video once cost between €257 and €17,000, the same content can now be generated for just a few euros using widely accessible AI video tools. This dramatic price reduction has made deception significantly cheaper to operate and easier to scale across multiple fraud categories.

New Fraud Categories Emerge

The report states that falling costs have enabled entirely new categories of fraud, including what’s become known as the “lost pet scam.” According to the analysis, fraudsters generate AI-made images of supposedly found pets, tricking anxious owners into paying small recovery fees typically around €43. This emotional exploitation model makes victims less suspicious and unlikely to pursue legal action, creating an ideal mass-scale fraud operation for criminals.

Miguel Fornes, Information Security Manager at Surfshark, commented that “as the cost of fabricating lifelike images and videos approaches zero, scammers are industrialising deception.” He added that such small-ticket scams represent only part of the broader threat landscape, with deeper concerns around deepfake-enabled investment schemes and identity spoofing., according to market trends

Corporate Security Breaches

The threat extends beyond individual consumers to corporate security. According to reports, deepfakes have been used to bypass recruitment background checks, including one documented case where a cybersecurity company unwittingly hired a North Korean hacker who successfully faked his video interview and credentials. This incident highlights the growing sophistication of synthetic identity fraud targeting enterprise environments.

Oliver Quie, CEO of British cybersecurity startup Innerworks, noted that “we’re facing AI-powered deception that can mimic legitimate users with frightening accuracy. Existing security companies have become obsolete because they assume threats will behave differently than legitimate users.” This sentiment reflects a broader industry recognition that traditional security approaches are inadequate against evolving synthetic media threats.

European Startup Ecosystem Responds

The surge in AI-driven deception has triggered corresponding innovation and investment across Europe’s cybersecurity sector. Reports indicate several funding rounds targeting deepfake detection and prevention technologies have closed this year, with Italy emerging as a particular hotspot with two active ventures in the biometric and deepfake-detection space.

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According to industry observers, these startups represent a continental effort to counteract a new layer of cyber-risk. The convergence of regulation, awareness, and financial backing has reportedly created a turning point in 2025, fueling an arms race between scammers deploying generative AI and defenders using AI to expose, verify, and block malicious activity.

Regulatory Framework Strengthens

The rising economic impact of AI-enabled deception has coincided with new EU-level measures aimed at increasing accountability and transparency. In February 2025, key provisions of the EU Artificial Intelligence Act took effect, requiring clear labeling of AI-generated content and transparency when individuals interact with AI systems. These rules directly target the misuse of generative tools for manipulation or fraud.

Under the new framework, AI systems that deceive or exploit vulnerable users can be classified as posing “unacceptable risk,” making them illegal within the EU market. Meanwhile, the Digital Services Act now obliges large online platforms to assess and mitigate systemic risks arising from manipulative or fraudulent content, including deepfake media used in phishing and impersonation scams.

Financial Sector Adaptation

The financial sector has received specific regulatory attention. In July 2025, the European Banking Authority issued an opinion highlighting how AI is being exploited for money laundering and fraud through fabricated identities and deepfake documents. The authority urged financial institutions to adapt anti-money-laundering systems to account for AI-enabled risks, creating compliance-driven incentives for fraud prevention startups.

Pablo de la Riva Ferrezuelo, Co-founder and CEO of cybersecurity startup Acoru, emphasized that “AI has changed the face of fraud and money laundering. You simply cannot expect technology built in 2010 to combat fraud happening in 2025.” This perspective reflects a wider sentiment among Europe’s cybersecurity founders that a new generation of technology built specifically for the era of synthetic media is urgently needed.

While technological solutions develop, industry experts still stress the importance of user vigilance and education as the first line of defense against increasingly sophisticated synthetic media threats. The combination of startup innovation, regulatory pressure, and public awareness campaigns suggests Europe is mounting a coordinated response to the deepfake fraud epidemic.

References & Further Reading

This article draws from multiple authoritative sources. For more information, please consult:

• https://www.pcmag.com/news/security-firm-discovers-remote-worker-is-really-a-north-korean-hacker
• https://www.grandviewresearch.com/industry-analysis/fraud-detection-prevention-market#:~:text=The%2520global%2520fraud%2520detection%2520and,18.7%2525%2520from%25202025%2520to%25202030.
• https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/digital-services-act_en
• https://www.eba.europa.eu/sites/default/files/2025-07/13ae2f94-dc04-4a50-9f24-af2808e78944/Opinion%20and%20Report%20on%20ML%20TF%20risks.pdf
• https://surfshark.com/research
• http://en.wikipedia.org/wiki/Deepfake
• http://en.wikipedia.org/wiki/Deception
• http://en.wikipedia.org/wiki/Startup_company
• http://en.wikipedia.org/wiki/Computer_security
• http://en.wikipedia.org/wiki/Electoral_fraud

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