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Attackers Exploit AI Hallucinations to Send Users to Phishing Sites

Threat actors are using a new technique called β€œphantom squatting” to trick AI tools into directing users to phishing sites, according to researchers at Palo Alto Networks’ Unit 42.

Since AI models frequently hallucinate phony information, they sometimes point users to websites that don’t exist. Threat actors are now registering these AI-hallucinated domains and using them to host phishing sites.

The New Face of AI Risk

Cybercrime used to have a β€˜"tell."Β It was the digital equivalent of a villain stroking their cat - clunky grammar, misspelt links and suspicious attachments that screamed β€˜phishing’.

Report: Social Engineering Remains a Central Part of AI-assisted Attacks

Threat actors continue to rely on social engineering as AI is incorporated into their attacks, according to ESET’s Threat Report for the first half of 2026.

ESET’s Director of Threat Prevention Labs, JiΕ™Γ­ KropÑč, stated, β€œRather than relying on entirely new methods and tools, attackers are quickly adapting established techniques to new platforms, technologies, and user behaviors. The number of AI skills within this new ecosystem is growing rapidly as we speak, further expanding the attack surface.”

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