CertiK’s latest blog details the depth of Pig Butchering in the crypto industry.
One of the most common forms of cryptocurrency fraud is the euphemistically named “pig killer” scheme. Pig butchering involves fraudsters who pose as successful traders and then persuade unsuspecting victims to invest with them and make extraordinary returns. Scammers first take the time to build trust with their victims on social media, text, or dating apps, before promising to teach them how to increase their life savings with cryptocurrency, forex trading, or other financial markets. After the scammer “feeds” the victim (pig) with the promise of huge profits, they then butcher, cutting off communication and absconding with the money the unsuspecting target has invested.
Scammers use a variety of disguises intended to build trust with their targets, including posing as mutual friends or former colleagues of the victim to initiate seemingly legitimate conversations. Butcher scammers will provide fake websites and apps that allow victims to track their investments. These sites give the impression that the initial investment is growing rapidly. However, when the victim tries to cash out back, scammers delay by asking for more information or informing “investors” that they have to pay income tax or some other fee to withdraw. The luckier victims will leave here, but those who take this bait will only lose more money. In the end, the victims are unable to retrieve the money they have invested and the fraudsters cut off contact with the victim, completing the fraud.
The Rise of Pork Butcher Fraud
According to the FBIPork fraud caused losses of more than $429 million in 2021. More than 75% of victims lost at least half of their net worth and approximately one-third were driven into debt as a result of pork fraud.
At Global Anti-Scam Organization reported that 67% of pork fraud victims were women between the ages of 25 and 40, who lost an average of $121,926. A similar study was conducted in the Australia and China reflected this skew, with approximately 69% of victims reported as women.
Perhaps surprisingly, 32% of pork victims have a college degree. This is a severe overrepresentation, just like that 13.1% of the US population holds an advanced degree.
The Global Anti-Scam Organization also found that victims of pork butchering schemes tend to be unaware of how organized brokers are, are targeted at a vulnerable time in their lives, and have large savings to invest.
How to Detect and Avoid Pork Butchering Schemes
At The FBI has issued four tips so as not to fall prey to similar pork and scams.
Verification of Investment Opportunity Claims
Conduct thorough due diligence on all investment opportunity claims. Butcher scammers often approach victims for the unrelated purpose of building trust and only introduce fraudulent investment prospects later once they have established a relationship with the victim. Be very careful when foreigners or long-lost contacts come to propose investment opportunities.
Double Check Your Domain Name
Many pork butcher scammers create domains that mimic the websites of legitimate financial institutions. Make sure you always check domain names, especially for cryptocurrency exchanges, to detect subtle changes that characterize fraudulent websites.
Avoid Downloading Suspicious Software or Apps
Stop and evaluate any investment app or software before downloading anything. To confirm the validity of the app, check the details available in the app store, such as the developer, seller, and description of the app. If the developer’s name is unknown, contains incorrect spellings, or closely resembles a well-known brand or organization, this may be a fraudulent application. Most app stores include a link to the developer’s website, so make sure the link points to the original site before proceeding. Beware of unknown websites asking you to download apps or software.
If an Investment Opportunity Sounds Great, It Is
The golden rule of due diligence investment applies here. If an investment opportunity seems too good to be true, it is. Pork scams often promise a money-back guarantee, which should be considered a major red flag.
Law Enforcement Action Against Pig Slaughter Scheme
On October 13, 2022, the US Department of Justice unsealed indictments against eleven residents in New York and New Jersey for allegedly defrauding victims of approximately $18 million in a pork butchering scheme. The defendants were charged with money laundering conspiracy, wire fraud conspiracy, bank fraud conspiracy, passport fraud conspiracy, and aggravated identity theft, among other charges, for their role in the scheme. This indictment marks the largest indictment of an individual for perpetrating and defrauding victims through a pork butchering scheme.
On November 21, 2022, the US Attorney’s Office for the Eastern District of Virginia announced the seizure of seven domains used in the pork butchering scheme. These domains are all fake versions of the Singapore International Monetary Exchange website.
The victim is missing over $10 million in the specific example of pig butchering.
On-Chain Investigation of Pig Butchering
Not all pork scams use cryptocurrency. This can make the flow of funds difficult to track in the often opaque world of banking. However, for those who do, we can easily use blockchain analysis to track stolen funds and identify scammers’ wallets.
In the previously mentioned case, after the victims accessed the fake Singapore International Monetary Exchange website, they were given one of seven deposit addresses on the Ethereum blockchain. After the victim transfers the funds to the wallet, the scammers will transfer the funds to the public intermediary’s deposit address.
From there, the funds are transferred to a decentralized exchange (DEX) where ETH is exchanged for stablecoins. From there, the funds are transferred to many other addresses and then spent by converting cryptocurrency to fiat currency by depositing many OKX addresses. According to US Secret Service, fraudsters likely chose to use OKX to off-ramp stolen cryptocurrency to fiat currency as an exchange based in the Seychelles and not available for use in the United States. Exchanges that establish points of operation outside the jurisdiction of the United States are less likely to respond to US search warrants and subpoenas, helping to protect against scammers and international money launderers.
In this case, the scammers continued this fraud from approximately May to August 2022, with at least five victims identified whose funds were transferred, stolen, and laundered through this series of on-chain transactions.
Pork combines manipulative tactics with sophisticated money laundering techniques, resulting in multi-layered fraud. Analyzing on-chain activity provides quantifiable insight into the mechanisms and magnitude of pork fraud. Armed with knowledge of how it works and what to look out for, potential targets are better able to identify and avoid falling victim to these scams.
The Importance of Knowing the Pork Butcher Scam
CertiK’s mission to secure the Web3 world includes spreading awareness and information about known and identified fraud. By understanding the common tactics used by fraudsters, users can detect and avoid these scams. On-chain activity can be analyzed and evaluated to better understand the money laundering methods of these scammers.
If you suspect you are being contacted by a scammer, you can report it to the FBI using Internet Crime Complaint Center. Users may alert the public by reporting suspicious projects directly from the website CertiK Security Leadership Board. Community alerts are shared in real time through @CertiKAlert.
Pork scams are one of the ways unscrupulous actors try to fleece unsuspecting investors out of their money. To read more, check us out Scam analysis runs aheadwhich is becoming increasingly popular on YouTube.
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