Study Finds Pig-Butchering Scams in Cryptocurrency Investments Net Over $75 Billion

A recent study suggests that pig-butchering scammers have potentially swindled over $75 billion from victims globally, a significantly higher amount than previously thought.

John Griffin, an economics professor at the University of Texas at Austin, and graduate student Kevin Mei collected crypto addresses from more than 4,000 scam victims. The popularity of fraud has exploded since the pandemic. Using blockchain tracking tools, they tracked the flow of funds from victims to fraudsters, who are mainly in Southeast Asia.

Over four years, from January 2020 to February 2024, criminal networks transferred more than $75 billion to crypto exchanges, said Griffin, who has written about fraud in financial markets. He said some of the total may be the proceeds of other criminal activity.

“These are large organized criminal networks, and they operate largely unscathed,” Griffin said in an interview.

The study, “How Crypto Flows Fund Slavery? The Economics of Pig Butchering,” was published Thursday. Griffin and Mei found that $15 billion came from five exchanges, including Coinbase, which is typically used by victims in Western countries. The study said that when scammers raised funds , they mostly converted them to Tether, a popular stablecoin.Of the addresses touched by the criminals, 84% of the transaction volume was in Tether.

“In the old days, it was very difficult to move that much cash through the financial system,” Griffin said. “You’d have to go through the banks and follow ‘know your customer’ procedures. Or you’d have to put cash in bags.”

Tether CEO Paolo Ardoino called the report false and misleading. “With Tether, every activity is online, every activity is traceable, every asset can be seized, and every criminal can be caught,” Ardoino said in a statement. “We are working with law enforcement to do just that.”

In some cases, Tether has cooperated with authorities to freeze accounts linked to fraud. But often the fraudsters have already cashed in by the time the crime is reported.

“Our paper shows that they are the currency of choice for criminal networks,” Griffin said.

Pig culls – a scam named after farmers fatten pigs before slaughter – often start with a text message from a wrong number. People who answer are attracted to crypto investments. But the investments are fake, and when victims send enough funds, the scammers disappear. As far-fetched as it sounds, victims routinely lose hundreds of thousands or even millions of dollars. One of your nation’s bankers was charged this month with embezzling $47.1 million from his bank as part of a hog slaughter scam.

The senders of the messages are often themselves victims of human trafficking from different parts of Southeast Asia. They are lured to compounds in countries like Cambodia and Myanmar with offers of high-paying jobs, then imprisoned, forced to cheat, and sometimes beaten and tortured. The UN has estimated that more than 200,000 people are detained in fraud societies.

Chainbrium, a Norwegian cryptographic investigation company, collected many of the blockchain addresses of fraud victims. Chainbrium also conducted its own analysis of the data and found that a large portion of the funds flowed through an allegedly decentralized crypto exchange called Tokenlon. According to Chainbrium, scammers use exchanges to obscure the source of funds. Tokenlon did not respond to a request for comment.

“People in the United States, their money goes straight to Southeast Asia, this gray economy,” said Jan Santiago, a consultant at Chainbrium.

Ultimately, the criminals sent the fraudulent proceeds to centralized crypto exchanges to withdraw traditional money. Griffin said Binance was the most popular exchange even though the company and its founder Changpeng Zhao pleaded guilty in November to criminal anti-money laundering and sanctions charges and agreed to pay $4.3 billion to settle a long-running investigation by prosecutors and prosecutors. regulators.

“Binance is a place where they can move large amounts of money out of the system,” Griffin said.

Like Tether, Binance has worked with law enforcement in some cases to freeze accounts linked to fraud and return money to victims. A company spokesman said it recently worked with authorities to seize $112 million in a pig slaughter case.

“Binance continues to work closely with law enforcement and regulators to raise awareness of scams, including pig slaughter cases,” spokesman Simon Matthews said.