Crypto Crime Typology: Deciphering Pig Butchering Scams

Crypto Crime Typology: Deciphering Pig Butchering Scams

Welcome to AMLBot Stream Podcast Episode 2! Today’s topic is the Pig Butchering Crypto Scam, Graeme Hampton, (Anti Money Laundering Advisor at AMLbot and Co-Chair with the International Association for Trusted Blockchain Applications) podcast host, speaks on this rising deception scam targeting unsuspecting victims.

You can listen or subscribe now on Apple Podcast,SpotifyAudible or Youtube. Continue reading for a comprehensive preview of episode 01.

In this video, listeners will delve into this scam typology, understanding how scammers assist victims in setting up wallets with legitimate exchanges. Exploiting the complexity of crypto transactions, scammers start by building trust, often masquerading as romantic partners on dating platforms or social media.

But why "Pig Butchering"? It refers to splitting large sums into smaller transactions, complicating tracking and laundering money. The impact is severe, causing financial ruin and psychological trauma to victims.

As victims become emotionally invested, scammers introduce requests for financial assistance, leveraging sympathy and vulnerability. Eventually, victims are persuaded to transfer funds to a fictitious investment platform, where the scammer manipulates transactions to evade detection.

Combatting such scams requires a multi-pronged approach, including education, enhanced security measures, and international cooperation among law enforcement agencies.

Watch till the end for a real-life case study and a call to action for increased awareness and vigilance in the crypto community. Remember, if it sounds too good to be true, it probably is.

Join the fight against crypto scams by staying informed and reporting suspicious activities.

"The development of advanced blockchain analytics tools such as AMLBot Pro helps to trace the flow of funds on the blockchain and identify suspicious activities. These tools are increasingly used by exchanges, law enforcement, and regulatory agencies."

Detailed episode timeline by minute 

0:00 - Introduction to the Pig Butchering Scam

0:55 - How Crypto Scammers Build Trust and Connection

2:17 - Red Flags and Social Engineering Tactics

3:23 - Scammer Introduces Vulnerability Narratives

4:11 - Fostering Emotional Intimacy and Bonding

5:26 - Romance Scam Scenario

6:18 - Introducing the Fictitious Investment Platform

7:19 - Breaking Down Large Sums into Smaller Transactions

8:02 - Using a Hot Wallet

8:31 - Manipulating the Fictitious Site to Show Fake Profits

10:12 - Laundering the Scam Proceeds

11:34 - Impact on Victims and the Cryptocurrency Ecosystem

13:46 - Legal Implications and Efforts to Combat Pig Butchering Scams

16:02 - Regulatory Measures and Law Enforcement Cooperation

17:01 - Raising Awareness and Continuous Efforts

18:03 - Real-Life Case Study

18:56 - Challenges in Prosecuting Global Scams



Today’s topic is the Pig Butchering Crypto Scam, Where I will unveil this deception with an overview on its growing popularity.

Traditionally it might conjure images related to the agricultural industry, in the context of fraud, it refers to a long con where scammers groom their victims over time, building a relationship and trust, before eventually convincing them to part with large sums of money. 

So without further ado, I’ll butcher this scam typology and break it down for you. 

I’ll share an explanation of how scammers assist victims in setting up wallets with legitimate exchanges.

This scam exploits the complexity and novelty of cryptocurrency transactions, which many people may not fully understand. It starts with Building Trust and a Connection: 

One scheme is where the scammer creates a fake persona, often portraying themselves as an ideal romantic partner. They initiate contact with the victim through online dating platforms and social media. Over time, the scammer invests their efforts in building a deep emotional connection with the victim. 

They may share personal stories, photos, and intimate details about their life to establish trust. 

You might be thinking, but isn’t that reasonably normal in today’s society?

This is where individuals are required to think further, because these actions can be deemed normal for some. Sharing some personal information and exposing private matters with strangers has become more acceptable, within reason. 

However, it’s more of a matter of timing, too much too soon with no due diligence is certainly a red flag.  The social engineering is well planned out, at early stages it may not be too obvious to some, for many reasons, which needs to be judged on an almost on a case-by-case situation. 

Because vulnerable people can be lonely, or have dreams and ambitions like anyone else. My aim isn’t to lecture on the psychology of dating, but, to educate where Crypto scams play their role. 

Case studies have shown that it is only after an individual reflects on the scam that they can how nieve they were, so it’s very wise to learn from other people’s mistakes.

Another approach is where the scammer reaches out to the potential victim, often through social media, or messaging apps, presenting an enticing investment opportunity in cryptocurrencies. 

They may also impersonate a trusted figure or present a very convincing profile to gain the victim’s trust. The scammer strategically introduces elements of vulnerability into their narrative. 

They may claim to have faced hardships or tragedies in their past, such as financial struggles, health issues, or family problems. By sharing these vulnerabilities, the scammer elicits sympathy and compassion from the victim, fostering a sense of emotional intimacy and bonding. Either way, once a strong emotional bond is formed, the scammer gradually introduces requests for financial assistance.

They may fabricate stories about urgent financial needs, such as medical bills, legal fees, or business investments, claiming that their current circumstances prevent them from accessing their funds. 

The scammer uses persuasive tactics, including guilt-tripping or promising future rewards, to convince the victim to send money or provide access to their financial accounts. 

The scammer will assist the victim in setting up a wallet with a legitimate cryptocurrency exchange. This step is designed to build further trust and to introduce the victim to the process of handling cryptocurrency transactions, making them feel more comfortable and in control. 

You could be asking, so how does this play out in everyday situations?

Let’s take the Romance case, where throughout the scam, the scammer maintains the illusion of a genuine romantic relationship, leveraging the emotional attachment they've cultivated with the victim. They may reassure the victim of their love and commitment, even as they continue to exploit their trust for financial gain. 

The scammer employs manipulation tactics like, imagine how good life will be once are together, to help deflect any doubts or concerns raised by the victim, further perpetuating the deception. Once this  has been achieved their calculated process begins.

The next move for the scammer is to introduce a “fictitious” website and the process of funnelling crypto into prepared accounts. After gaining the victim’s trust and ensuring they have the means to handle cryptocurrencies, the scammer introduces the victim to a fictitious investment platform or website. This site is designed to look very professional and legitimate, often mimicking the design and functionality of well-known cryptocurrency exchanges or investment platforms.  

The "pig butchering" technique involves breaking down large sums of money into smaller, less conspicuous transactions to evade detection and facilitate money laundering. 

In romance scams the scammer may request relatively small amounts of money initially, gradually increasing the requests over time as the victim becomes more emotionally invested in the relationship. By incrementally extracting funds from the victim, the scammer avoids raising suspicion and prolongs the duration of the scam.

Do you think this sounds too extreme, to be true?  then wait for the rest and in the end I’ll share a case.

The scammer is now in a position to make use of a hot wallet. you be asking why it is called hot? 

The short answer is, a hot wallet is connected to the internet for quick and easy payments, an offline wallet is referred to as a cold wallet, but, I’ll leave that for a different discussion,  so I don’t come off-topic.

The scammer then instructs the victim to transfer cryptocurrency to a wallet associated with the fictitious site, promising high returns on investment, guaranteed profits, or exclusive access to cryptocurrency investment opportunities.  

Once the transfer is made, the scammer may manipulate the fictitious site to show fake profits or investment growth, encouraging the victim to invest more. 

The aim of the scammer is to mix the legitimate cryptocurrency from the real exchange with the fraudulent scheme, the fictitious investment platform makes it particularly convincing and unfortunately very dangerous. 

You may well be thinking, so where does the name “Pig Butchering?” derive from?

I’ll explain the Anatomy of the Scam:  

It is where a fake app or website acts as a hot wallet, it looks authentic, and this address will most likely change approximately every 2-3 months. Once the Accumulation of over 2000 BTC is in the hot wallet, it is split into hundreds of smaller accounts of around 15 BTC each. 

This process is repeated to further obscure the origin of the funds by splitting again into further large and small accounts, the distribution of funds into Small accounts for around 10 BTC and Larger accounts for around 150 BTC. 

So now there is a much larger network of wallets.

Now the criminals have the scam proceeds, they need to transfer some of it back into currency: As it’s only useful if they can spend or use it. 

For this example, let’s say Mules are used to apply known Money Laundering techniques by placing and cleaning the funds through the financial system with layering and integration techniques. 

Also, the process of sending some funds back to the original hot wallet for co-mingling purposes, which is to mix legitimate with illegitimate funds, makes it harder to detect in Transaction Monitoring analytics, reports and investigations.

The impact of such scams on victims and the cryptocurrency ecosystem  is particularly severe for both victims and the broader ecosystem:

 The Impact on Victims and Financial Loss: When Victims are lured into transferring substantial amounts of money or cryptocurrency under the guise of investment opportunities. These losses can be life-changing and are usually irreversible, given the anonymous nature of cryptocurrencies.

The methodical grooming process can lead to significant psychological trauma for victims. The betrayal of trust, especially over a period where a pseudo-relationship is developed, can lead to depression, anxiety, and a profound sense of violation. 

Victims may lose trust in digital platforms and become wary of genuine online relationships or legitimate investment opportunities, affecting their personal lives and potentially limiting their engagement with the digital economy. 

Scams like pig butchering tarnish the reputation of the cryptocurrency ecosystem. They contribute to a perception of the crypto space as lawless and rife with scams, deterring new entrants and potential investors. A rise in such scams can lead to increased regulatory scrutiny and calls for tighter controls over cryptocurrency transactions. 

While regulations are essential for consumer protection, overly stringent measures could stifle innovation and the growth of the sector. Large-scale scams can lead to sudden movements in cryptocurrency markets, especially if scammers dump stolen assets on the market to realise their gains. This can contribute to market volatility, affecting innocent traders and investors. 

Trust is a fundamental component of any financial system. Repeated scams can erode trust in cryptocurrencies, making it harder for legitimate projects to attract investment and users. 

Combating pig butchering scams requires a multi-faceted approach, including better education for consumers about the risks of online investments, improved security measures by platforms, and enhanced cooperation between law enforcement agencies worldwide to trace and apprehend scammers.

The legal implications and efforts to combat "pig butchering" scams, particularly in the realm of cryptocurrencies, are complex and multifaceted, reflecting the challenges of dealing with a relatively new and rapidly evolving threat. These scams often involve perpetrators and victims in different countries, complicating legal action due to varying laws and regulations on fraud and cybercrime. 

The decentralized nature of cryptocurrencies and the lack of uniform global regulation make it difficult to pursue legal action against scammers. There's often ambiguity about which legal framework applies, especially in cross-border cases. 

Anonymity Issues: The pseudo-anonymous nature of cryptocurrency transactions complicates the identification of scammers. 

While blockchain technology offers transparency of transactions, connecting wallet addresses to real-world identities remains a challenge. Even when scammers are identified and apprehended, recovering stolen funds can be difficult. Cryptocurrencies transferred to offshore wallets or converted into other assets may be nearly impossible to trace and return to victims. 

Many countries are working on or have implemented stricter regulations for cryptocurrency exchanges and wallets, including Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols, to prevent scams, The 6AMLD and MiCA aims to stifle these crimes in the EU. Law enforcement agencies across jurisdictions are increasingly cooperating to combat cross-border cybercrimes, including pig butchering scams. 

This includes sharing intelligence and best practices for tracking digital transactions tied to illegal activities. Governments, regulatory bodies, and private organizations are launching educational campaigns to raise awareness about the risks of online investment scams and how to recognize and avoid them. 

"The development of advanced blockchain analytics tools such as AMLBot Pro helps to trace the flow of funds on the blockchain and identify suspicious activities. These tools are increasingly used by exchanges, law enforcement, and regulatory agencies."

Where possible, authorities are taking legal action against individuals and networks involved in pig butchering scams. This includes arrests, prosecutions, and, in some cases, significant penalties designed to serve as a deterrent. 

Despite these efforts, the evolving nature of technology and the sophistication of scammers mean that the battle against pig butchering scams is ongoing. It requires continuous updates to legal frameworks, technological tools, and public awareness strategies to effectively mitigate the threat.

The Conclusion: is that a call to action for increased awareness and caution in the cryptocurrency community is important. 

Reporting suspicious activities and collaborating with authorities to combat fraud are encouraged to help support victims, which is also a legal requirement in regulated jurisdictions.

The purpose of this video is to support the education and vigilance in preventing victims from falling into similar scams. I will finish off with a short real-life case study called Brook Lynda which can be found at:

The article highlights the Brooklyn District Attorney's Virtual Currency Unit's successful disruption of a pig butchering operation that targeted people across the United States with fake cryptocurrency investments, resulting in significant financial losses. Victims were targeted online and convinced to invest in bogus cryptocurrency opportunities with promises of high returns. Victims would be blocked from withdrawing their funds, resulting in significant financial losses.

The victims were lured into investing in fraudulent cryptocurrency schemes promising high returns, only to discover they couldn't withdraw their funds. 

The DA's office seized multiple web domains associated with the scam. The investigation revealed victims from various states and emphasized the challenges in prosecuting these global scams due to their international nature. The public was urged to exercise caution, scepticism, and due diligence when considering cryptocurrency investment opportunities that appear too good to be true.

I’ll leave you with a question, does this change how you look at these Crypto scams?

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