US State Delaware freezes compromised crypto accounts to protect victims of Pig Butchering scam

• The pig butchering scam is not the usual romance scam.
• Victims are contacted randomly and lured into high-paying investments.
• Losses run in billions of USD; crypto one of the conduits of funds transfer

The US state of Delaware’s Department of Justice issued a Cease and Desist order against 23 entities and individuals involved in a cryptocurrency scam known as the “pig butchering scam.” 

People in the state complained to the Department’s Investor Protection Unit that anonymous persons had scammed them of their cryptocurrency using the infamous method.

In the press release dated September 28th, Investor Protection Unit of the Department of Justice, Delaware effectively prohibited the transfer or withdrawal of cryptocurrency from victims accounts. The cryptocurrency was traced with the help of a data analytics company. 

The Attorney General of Delaware, Kathy Jennings stated that “Protecting investors from online scammers is extremely important,”

“When victims lose money through cryptocurrency scams, including the pig butchering scam, it can be difficult to recover those funds. Today’s order takes a first step toward protecting Delaware investors from the pig butchering scam by freezing funds at risk from further transfer by the wrongdoers.” She added.

The Pig butchering scam

Unlike ‘Romance scams’ where victims are honey trapped or get into romantic relationships with scammers, Pig butchering has a different approach. Real pig butchering involves feeding a pig regularly so that it grows fat; when the pig grows fat and plump, it is butchered.

In the scam, a scammer builds trust with a victim over time. This may or may not be via romantic relationships. After earning the victim’s trust,, the scammer shares lucrative investment opportunities with them. With fabricated returns, the scammers urge the victims to invest more money. 

However, the victims are never able to withdraw the principal or returns. Eventually, the funds and the “friend” (or whatever relationship the scammer and victim get into) disappear. In most cases, there is no way to retrieve money and law enforcement agencies have had little success in catching the scammers. 

Forbes reported how a 52 year old man in the Bay area, California lost over 1 million dollars to a pig butchering scam. The victim shared ‘heartbreaking’ WhatsApp conversations with the scammer, carried out over a period of around 3 months with Forbes. 

The 52 year old man was randomly contacted by a female who claimed she found his number on her contact list. Their text conversations moved to WhatsApp upon her request and from casual they turned into financial advice. She claimed to be making ‘boatloads’ of money using an application called MetaTrade which is available on Apple’s App store. She would speak with him about his personal life and showed care and concern; she got him to invest over 1 million dollars, of which a ‘quarter’ was borrowed money. 

The victim claimed that the interface of the application which enabled investments and trade, seemed 100% genuine and that he felt it was safe since it was available on the App store. 

In this particular case, all transfers were done in cryptocurrency via legitimate exchanges including Coinbase and Crypto.com. 

According to Jan Santiago, the deputy director of Global Anti-Scam Organization (referred to as GASO from here on), globally, the losses in such scams are in billions of dollars. Santiago told Forbes that these scams “on a large scale, on an industrial scale — like they’re doing fraud in a factory.”

Human trafficking makes it harder to fight this social engineering scam. Forbes notes that scammers themselves may be victims, acting on threats of violence. 

Forbes spoke with multiple victims of pig butchering. It learned that ‘anyone’ can be a target; doctors, students, engineers – all of whom were tech savvy – were among those pig butchered. 

CypherBlade, a private firm investigating cryptocurrency, told Forbes that losses in 2021 were in ‘tens of billions’ of US dollars. According to the firm, these scammers are based in Southeast Asia, mostly China. 

This is not the typical scam

A detailed report by Cypherblade’s Paul Sibernik lists the social tactics used by scammers to earn victims trust. The key difference between a Romance scam and pig-butchering scam is that victims are not cheated after they ‘invest’ for the first time. They are scammed when the amount is significant. In rare cases, the scammers might allow the victim to withdraw funds, only if the amount is small or if the scammer believes the victim is capable of being milked even more in the future.

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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