Watch Out for Pig Butchering Scams with 2 Key Steps

By Marija Matic

In the ever-evolving crypto market, a surge in what's known as pig butchering scams is becoming increasingly evident. 

While not entirely new, this scheme's recent proliferation demands your awareness. 

That’s why this week, I want to take the time to break down what’s so alarming about this surge and how you can protect yourself. 

Imagine turning to a dating app seeking a romantic connection. But instead of finding a regular date, you encounter an engaging individual who expresses a strong interest in cryptocurrency trading.

Your online relationship progresses rapidly, and this person convinces you to invest in their trading associates’ accounts. It may start as a seemingly reasonable proposition. And hey, this is a person you are interested in dating, so you choose to believe them and don’t think too much when they suggest raising the amount you invest. 

This is a part of a rapidly expanding form of deceit known as the pig butchering scam.

By the time the realization hits that you’ve been taken for a ride, you are likely out a sizeable portion of money. 

This happens more often than you’d think. Statistics indicate that roughly 12% of Americans using dating apps — or roughly 6.8 million people — have encountered a pig butchering scam — a number that’s doubled in the past five years alone!

And the idea of a romance scam isn’t exclusive to crypto. Indeed, the Federal Trade Commission revealed that in 2022, losses due to romance scams cost Americans $1.3 billion in total.

But the digitization of assets and the lack of regulatory protections in the space make it ideal for bad actors to misuse. 

And it’s the crypto angle that distinguishes a pig butchering scam from other romance scams you could come across. Pig butchering scams are intricate, long-term cons that combine elements of romance scams, investment ploys and cryptocurrency fraud. 

In a nutshell, the pig butchering scam involves a fraudulent tactic where criminals establish digital relationships with victims to gain trust, subsequently persuading them to invest in cryptocurrency platforms. Unbeknownst to the victims, these fraudsters operate and control the platforms, eventually escaping with all invested funds.

According to the FBI, this scam originated in China in 2019. Since then, Southeast Asia has become a hotspot for gangs running a corporate-like structure, using human trafficking victims to run the scams.

Here’s how a pig butchering scam unfolds: 

• The scammer starts by reaching out to someone online through social media, dating apps or even with a wrong number text message. Once they find a suitable target, they establish constant communication to build a relationship. 

• After gaining the victim's trust, the scammer introduces the idea of cryptocurrency trading. They may claim to have inside information or connections in the investment industry and promise significant returns. 

• The scammer then suggests downloading a trading app and offers to trade together. However, this app is in fact controlled by a group of scammers. 

• Once a victim joins the platform, the scammer engages in fake trades to make it appear like they are earning profits. They might even encourage victims to withdraw some of their supposed gains, aiming to boost their confidence. 

• As victims become convinced of the legitimacy of the platform, they start investing larger sums of money. Over time, the scammer manipulates the victim to keep them investing, a step likened to "fattening the pig" before the inevitable slaughter. 

• When victims attempt to withdraw their funds, the platform presents various issues with their accounts or demands hefty fees and taxes for accessing their crypto. Unfortunately, even if the victim pays these fees, they never receive their cryptocurrency back. 

• Eventually, the victim realizes the truth, but the fraudster and the platform disappear, leaving little chance of recovering the funds due to the nature of blockchain transactions.

1 Common Mistake Made by Scammers You Can Use Against Them

Despite the apparent sophistication of these schemes, scammers frequently make one cardinal mistake: Rather than securing their gains in uncensorable Bitcoin (BTC) or other decentralized cryptocurrencies, they opt for the stability of Tether (USDT), a centralized stablecoin. 

While Tether, the issuing company, lacks insight into individual USDT holders, it retains the technical ability to freeze USDT associated with suspected scam accounts. 

This became evident recently when, on Nov. 21 of this year, the FBI successfully froze $225 million in stolen USDT linked to an international criminal gang specializing in pig butchering scams.

While it’s great that these scammers have a mistake you can exploit, if you do find yourself a victim, the best defense against a pig butchering scam is avoiding getting caught in one altogether. 

That’s why I’ve prepared …

The 10 Signs of a Pig Butchering Scam

1. Receiving unexpected “wrong number” texts that evolve into a rapport-building conversation.
    
2. An online acquaintance suddenly starts talking about crypto.
    
3. Rapid, excessive affection, also known as “love bombing,” from a match on dating platform.
    
4. An online friend using emotional manipulation — guilt tripping, gaslighting, comparing you unfavorably to others, use of ultimatums, establishing an “us versus them” mentality with you — to gain your trust and isolate you from anyone who would warn you against trusting them.
    
5. A friend urges you to invest in a centralized crypto exchange you don’t recognize.
    
6. You’re told to download a “special” crypto trading app.
    
7. You’re directed to an investment website that offers tiers with minimum investment amounts. 
    
8. The scammer offers to start trading with you.
    
9. You get a quick, small return on your initial investment.
    
10. The investment platform you were directed to use demands substantial tax payments or fees. 

Pig butchering scams use social engineering to build your trust over weeks and months. If you see any of these warning signs, break off all contact with the scammer.

This prevalent scam involves parting ways with your crypto by handing it over to a third party or depositing it into a centralized app.

Now, there are situations where we trust someone who isn't intentionally scamming us. For instance, it could be a well-intentioned yet naive friend, genuinely believing they're introducing us to a lucrative new trading app. 

However, just a little knowledge can go a long way in protecting yourself. 

First, never use any platforms you are not familiar with or haven’t been able to research independently. 

Sure, the crypto world aims for trustlessness. But that doesn’t mean trust everyone! It means, in an ideal world, you don’t have to trust anyone because their information is available for anyone to verify on the blockchain. 

So, no matter if you got a recommendation from a friend or if you’re looking at a new platform you read about online, do your own research before trusting anyone with your crypto and never risk more than you’re willing to lose. 

Second, our stance on centralized exchanges remains firm: We do not recommend ever storing your crypto on a centralized platform. 

Even if you’re using an established platform like Coinbase or Binance, the core ideology of crypto is to maintain custody of your own assets. Not your keys, not your crypto. 

Leaving your crypto up for grabs on a centralized exchange is risky no matter the context. But with scammers about, it can be an even more devastating decision.

My suggestion? 

Open a self-custody soft wallet — a browser extension that creates a unique address for your crypto that only you can access. 

In fact, my colleague Beth Canova wrote to you last week walking you through that exact process if you are looking for a how-to guide.

And scams like this are the reason she prepared such an article: The knowledge of self-managing finances serves as a safeguard against deceptive schemes, such as pig butchering scams. 

This is at the core of what we do and why you are here with us. 

This year is already shaping up to be an exciting ride. Just don’t forget to take steps to keep yourself safe as you target the opportunities we anticipate lay ahead.

Best,

Marija Matić