On Thursday, December 14, the Department of Justice (DOJ) announced an indictment in what is described as the latest cryptocurrency investment scam known as ‘pig butchering’ to the tune of $80 million dollars. But as Americans are becoming victims as they are duped out of their life savings, it turns out the scammers on the front lines are victims themselves of human trafficking mainly located on the other side of the globe in Asia.
With financial devastation on one hand and the potential growth of modern-day slavery on the other, ‘pig butchering’ may be one of the more pernicious ‘crypto’ crimes to date. More broadly than the DOJ’s enforcement action – which is not the first regarding pig butchering this year – is the United Kingdom’s decision to sanction people and businesses in Southeast Asia that are connected to the pig butchering scams. According to Ari Redbord, the Global Head of Policy at TRM Labs, “HM Treasury in the UK used sanctions to target traffickers and businesses they hide behind mostly in Cambodia.”
The U.K. official announcement this month that included sanctions actions 46 human rights abusers on the 75th Anniversary of the Universal Declaration of Human Rights, included sanctions which, “…targets 9 individuals and 5 entities for their involvement in trafficking people in Cambodia, Laos and Myanmar, forcing them to work for online ‘scam farms’ which enable large-scale fraud.” According to the U.K., “Victims are promised well-paid jobs but are subject to torture or other cruel, inhuman, or degrading treatment.”
In an interview with Redbord, he explained there are two distinct crimes in pig butchering. “One is the individual English-speaking in the U.S. or Europe. The other is the human trafficking of the person doing the scamming. H.M. Tresary (U.K.) is going after the traffickers who are forcing them to engage in the activity.”.
In the U.S., the December indictments were not the first, as the DOJ announced a seizure of $112 million related to pig butchering in April and the seizure of $9 million of Tether USDT in November. According to the April 2023 press release, frauds involving cryptocurrency have increased at a “staggering 183% from 2021 to $2.57 billion in reported losses during 2022”. According to Redbord, while cryptocurrency has allowed funds to be moved across the globe faster than in the past, “Authorities are having a lot more successes because of track and trace.” The $9 million of Tether that the FBI seized was thanks to the transparency of blockchain technology that companies like TRM Labs use to help identify the source and location of criminals.
“Transnational criminal organizations are combining confidence scams with technological savvy to swindle Americans out of their hard-earned funds,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division in the April 2023 press release. “These particularly vicious frauds – where scammers carefully cultivate relationships with their victims over time – have devastated families and cost individuals their life savings. Now that we have seized this virtual currency, we will seek to swiftly return it to victims.”
The DOJ is definitely not the only department focused on this issue. In September 2023, the Financial Crimes Enforcement Network (FinCEN) released an alert to financial institutions to ‘sound the alarm’ about pig butchering, according to FinCEN Acting Director Himamauli Das.
Anatomy Of A Pig Butchering Scam
The FinCEN alert describes these pig butchering scams that, “resemble the practice of fattening a hog before slaughter. Victims invest in supposedly legitimate virtual currency investment opportunities before they are conned out of their money.”According to FinCEN, “Scammers refer to victims as ‘pigs,’ and may leverage fictitious identities, the guise of potential relationships, and elaborate storylines to ‘fatten up’ the victim…before they defraud the victims of their assets—the ‘butchering.”
A research report from Redbord’s firm TRM Labs on pig butchering from 2021 to 2022 indicates links to large transnational organised crime groups. Many appear to be operating from South East Asia, according to TRM research, which is consistent with widespread reports of pig butchering and human trafficking networks based in Laos, Myanmar, Cambodia and other neighboring countries.” FinCEN’s alert notes these scams, “are largely perpetrated by criminal enterprises based in Southeast Asia who use victims of labor trafficking to conduct outreach to millions of unsuspecting individuals around the world.”
The interconnectedness to transnational crime and the use of victims of labor trafficking to conduct these schemes against individuals in the U.S. is not slowing down either, according to law enforcement. The TRM report provides further analysis that “…pig butchering is in fact a series of highly sophisticated operations often carried out by interlinked professional transnational crime syndicates.” Thus, those that are victims should understand how sophisticated psychological manipulation is involved, which may be of little comfort but important to understand as this crime wave continues to impact Americans.
What Options Exist For All Victims Involved
The DOJ release does provide encouragement for victims to report when these crimes take place and are hopeful that a public awareness campaign will help get individuals be more on guard against these scams. The DOJ has requested that, “If you or someone you know is a victim, report it to the IC3.gov. In the report, please reference “Pig Butchering PSA” and include as much information as possible in the complaint.” Unfortunately, the embarrassment factor involves leads to underreporting of the problem, where some authorities estimate cases actually reported are only 15% of all pig butchering scams that occur.
Meanwhile, the U.K. has fired the first shot in applying sanctions against the individuals and entities involved in the ‘scam farms’ that include victims of human trafficking in the pig butchering equation. As Redbord noted, “This [pig butchering] is a new name for romance scams that have been ongoing for a decade or more. U.S. Treasury sanctioned Nigerian scam artists for romance scam activity, long before crypto.” But now, it appears the transparency of the cryptocurrencies on blockchains are allowing law enforcement officials to not only identify the criminals, but start to apply sanctions that pinpoint the problem related to these scams overseas as its source.
