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A recent study by finance professor John Griffin and graduate student Kevin Mei from the University of Texas at Austin revealed shocking findings about the extent of pig-butchering scams in the cryptocurrency world.
These scams, which have seen a surge in activity since the onset of the pandemic, have likely siphoned off more than $75 billion from victims globally in less than four years.
Griffin and Mei meticulously traced the movement of funds from over 4,000 victims to the scammers behind these schemes, predominantly based in Southeast Asia. Over four years, from January 2020 to February 2024, the criminal networks managed to transfer this staggering sum to various cryptocurrency exchanges.
Griffin noted that while some of these funds might originate from other illicit activities, the bulk is likely the proceeds of pig-butchering scams.
The term “pig butchering” refers to a scam where unsuspecting individuals are tricked into making fake crypto investments through misleading text messages. They are then redirected to legitimate-looking investment apps and accounts so that they can deposit the money of their own volition. The apps are designed so the victims always see their investments increase. In reality, the victim is simply sending the money to scammers.
The scammers vanish once victims have “invested the money,” which often amounts to hundreds or even millions of dollars.
Disturbingly, the individuals perpetrating these scams are often victims of human trafficking themselves. Many are coerced into participating in the scams after being promised lucrative jobs in Southeast Asian countries, only to find themselves trapped and subjected to abuse.
Griffin and Mei’s study, titled “How Do Crypto Flows Finance Slavery? The Economics of Pig Butchering,” sheds light on the mechanics of these scams. They found that a significant portion of the funds collected by scammers was converted into Tether, a popular stablecoin. Despite claims of traceability made by Tether’s CEO Paolo Ardoino, Griffin emphasized that Tether remains the currency of choice for these criminal networks.
However, the accuracy of the study’s findings has been questioned by blockchain analysis firm Chainalysis Inc., which suggests that quantifying funds earned through pig-butchering scams is challenging due to limited reporting.
Additionally, Norwegian crypto investigations firm Chainbrium highlighted the use of a decentralized exchange called Tokenlon by scammers to obscure the origins of the funds.
Despite efforts by exchanges like Binance to collaborate with law enforcement and freeze accounts associated with fraudulent activities, the scale of pig-butchering scams underscores the challenges authorities face in combating crypto-related crimes.
As victims continue to suffer significant financial losses, raising awareness and implementing robust regulatory measures remain imperative in addressing this ongoing threat.
