Blockchain security firm Chainalysis released an alarming mid-year update on cryptocurrency crime on August 29, 2024, revealing a significant surge in “pig butchering” scams within the crypto market. These scams involve malicious actors who “fatten up” their victims by enticing them with promises of substantial returns before ultimately “slaughtering” them by vanishing with their funds.
Evolving Trend of Pig Butchering Scams
The Chainalysis report indicates that 43% of this year’s scam-related inflows have been directed into wallets established in 2024, with many of these linked to pig butchering schemes. Notably, one of the largest identified scam wallets is associated with Myanmar’s KK Park, a notorious figure in the realm of pig butchering scams, accumulating over $100 million.
Furthermore, the report points to the successes of law enforcement agencies in dismantling long-standing Ponzi schemes. Consequently, crypto criminals are adapting by opting for shorter scams, with the average lifespan of these scams plummeting from 271 days in 2020 to just 42 days in 2024. This evolution highlights that scammers are becoming increasingly sophisticated, utilizing a blend of online and offline tactics, thus complicating efforts to apprehend them.
Scamming Techniques and Target Demographics
To deceive victims, scammers employ two primary strategies. First, they create new cryptocurrency wallets that obscure their identities. Second, they acquire active social media profiles—often from platforms like Facebook and Tinder—sourced from Chinese service providers. These profiles, designed to appear trustworthy, help scammers build rapport and convince victims to invest in fraudulent cryptocurrency projects. Over the past two years, this burgeoning market for illicit accounts has accrued over $10 million in crypto flows.
Eric Jardine, the cybercrimes research lead at Chainalysis, observed that victims of these scams are often vulnerable individuals, including the elderly, those experiencing life transitions, and people seeking companionship online. The personal nature of these cons makes them particularly insidious and effective.
Illicit Marketplaces and Law Enforcement Response
The Chainalysis report also identified Huione Guarantee as a significant illicit marketplace, having facilitated over $49 billion in cryptocurrency transactions since 2021. This platform serves as a nexus for various illegal activities, including pig butchering scams, investment fraud, and money laundering, while also connecting buyers and sellers via messaging apps like Telegram.
Amidst those challenges, law enforcement agencies have achieved some notable victories against pig butchering operations. Recently, U.S. prosecutors in North Carolina seized nearly $5 million in Tether (USDT) linked to a pig butchering scheme. FBI agent Robert DeWitt emphasized the importance of evolving tactics for law enforcement, stating, “As cyber-enabled fraud continues to adapt, so must the FBI and its partners.” He underscored that the recent seizure is a testament to the FBI’s commitment to protecting victims in the digital landscape.
In an interesting turn of events, on August 19, former Heartland Tri-State Bank CEO Shan Hanes was sentenced to over 24 years in prison for embezzling $47.1 million, which was funneled into a pig butchering scheme that ultimately victimized him.
The U.S. Federal Trade Commission (FTC) has also joined the fight against these scams, issuing a warning in June 2024 about the surge in pig butchering frauds, particularly those that exploit romance and cryptocurrency investments.