“Pig-butchering”; an unpleasant combination of investment frauds, romance scams and cryptocurrency fraud.
In December 2023, the United States Department of Justice (“DOJ”) announced a seven count indictment against four individuals for their alleged roles in a “pig-butchering” scheme involving over $80 million in losses to victims[1]. The inordinately large sum of victim losses coupled with the global reach of that scheme should serve as a warning – this particularly devious species of fraud is likely to remain prominent over the next few years.
Fortunately, there are some key indicators of pig-butchering schemes, which can assist both customers and financial institutions in recognising such attempts to commit fraud. In addition, financial regulators and government agencies are becoming increasingly alive to pig-butchering schemes. HM Treasury recently issued sanctions, including asset freezes and travel bans, specifically targeting perpetrators of “pig-butchering” for trafficking people in Cambodia, Laos and Myanmar, forcing them to work for online ‘scam farms’ which enable large-scale fraud[2].
What is pig-butchering?
Fear not, Babe, Wilbur and Peppa – no animals are harmed in pig-butchering frauds. Pig-butchering schemes are an unpleasant combination of investment frauds, romance scams and cryptocurrency fraud. FinCen has explained that these frauds are so-called because they resemble the practice of fattening a hog before slaughter[3]. These scams are largely perpetrated by criminal organisations based in Southeast Asia who use victims of forced labour and human trafficking to target millions of unsuspecting individuals around the world.
The hallmarks of a pig-butchering scheme are as follows[4]:
- The perpetrators will hunt and target victims on dating services, social media, or through unsolicited messages or calls, often masquerading as a wrong number or as a person trying to re-establish a connection with an old friend[5].
- The scammer may also create a social media profile highlighting their wealth and lavish lifestyle[6].
- The scammer will then initiate a relationship with their victim and slowly gain their trust.
- Once they are sure that they have gained their victim’s trust, the scammer will introduce the victim to a supposedly lucrative investment opportunity in virtual currency and direct them to use virtual currency investment websites or applications designed to appear legitimate, but which are fraudulent and ultimately controlled or manipulated by the scammer.
- The victim will be directed to other members of the scheme operating fraudulent cryptocurrency investment platforms and applications, where the victim will be persuaded to make financial investments.
- A scammer will sometimes use high-pressure sales tactics such as telling their victim that they will lose out on the opportunity if they do not invest by a certain deadline.
- In some variations of this scheme, scammers have invited the victim to join online or mobile games, advertised as “play-to-earn” games offering financial incentives to players, but which in reality are fake gaming applications created by the scammer to steal virtual currency from players[7].
- Once funds are sent to scammer-controlled accounts, the investment platform will often falsely show significant gains on the purported investment, and the victim will be convinced by this to make additional investments.
- When they have parted with a substantial enough sum, the victim will find that they cannot withdraw or recover their money.
Warning signs
Customers
- Website content: when visiting a website or application purporting to be associated with a legitimate virtual asset service provider or business involved in investing in virtual currency, customers should always check for signs of legitimacy on the website itself. The following are good indicators that the website is not legitimate:
- a web address or domain name that is misspelled so as to resemble that of another business
- a recently registered web address or domain name
- no physical street address
- international contact information
- dubious customer testimonials
- poor spelling and grammar on the website
- contact methods that include only chat or email.
- Unsolicited virtual contact: the harsh truth is that social media and gaming sites are not fertile grounds for genuine romance. If a customer receives an unsolicited message from someone they don’t know who persists in making contact, that customer should be alert for the possibility that they are a scammer.
- Request for remote access: scammers may also request remote access to the victim’s devices to register accounts with virtual currency service providers on the victim’s behalf or instruct their victim to take screenshots of their device so that the scammers can walk them through the process of purchasing virtual currency.
- High pressure tactics: fraudsters will frequently use pressurised language if they think that customers are wavering on parting with their money.
Financial Institutions
FinCEN, in consultation with law enforcement, has identified some red flags for banks and other financial institutions to help detect, prevent, and report potential suspicious activity related to pig butchering[8]:
- A customer with no history or background of using, exchanging, or otherwise interacting with virtual currency attempts to exchange a high amount of fiat currency from an existing or newly opened bank account for virtual currency or attempts to initiate high-value transfers to virtual asset service providers.
- A customer mentions that they were instructed by an individual who recently contacted them to exchange fiat currency for virtual currency at a virtual currency kiosk and deposit the virtual currency at an address supplied by the individual.
- A customer mentions or expresses interest in an investment opportunity leveraging virtual currency with significant returns that they were told about from a new contact who made unsolicited contact online or through text message.
- A customer mentions that they were instructed by an individual who recently contacted them to exchange fiat currency for virtual currency at a virtual currency kiosk and deposit the virtual currency at an address supplied by the individual.
- A customer appears distressed or anxious to access funds to meet demands or the timeline of a virtual currency investment opportunity.
- Accounts with large balances that are inactive or have limited activity begin to show constant, uncharacteristic, sudden, abnormally frequent, or significant withdrawals of large amounts of money being transferred to a virtual asset service provider or being exchanged for virtual currency.
Investigating and prosecuting pig-butchering schemes can be complex and requires an understanding of both criminal and civil procedure in order both to prosecute the perpetrators and recover the stolen funds. EMM has the experience and knowledge necessary to both investigate and prosecute these frauds. Those who are turned away by the police should know that they have a constitutional right to bring a private prosecution against these fraudsters and recover assets where identifiable.
Amelia Clegg
[1] https://www.justice.gov/opa/pr/four-individuals-charged-laundering-millions-cryptocurrency-investment-scams
[2] https://www.gov.uk/government/news/uk-and-allies-sanction-human-rights-abusers
[3] https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf
[4] Ibid.
[5] https://www.ic3.gov/Media/Y2022/PSA221003
[6] https://www.michigan.gov/ag/consumer-protection/consumer-alerts/consumer-alerts/scams/cryptocurrency-scam-pig-butchering
[7] https://www.ic3.gov/Media/Y2023/PSA230309
[8] https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf
