Feds seize $112m in cryptocurrency linked to 'pig-butchering' finance scams

Thieves go nose-to-tail stripping cash from victims

The US Department of Justice has seized cryptocurrency worth about $112 million from accounts linked to so-called pig butchering investment scams.

Judges in Arizona, California and Idaho authorized seizure warrants for six virtual currency accounts that prosecutors say were used to launder proceeds of the various frauds that cost victims millions of dollars after they were socially engineered into investing their savings in dodgy digicash schemes.

"In this case, the FBI Phoenix Division has identified at least 69 victims with an estimated loss of at least $33.9 million related to these various fraudulent investment platforms," according to the California court documents [PDF].

Pig-butchering fraud is a newish twist on traditional online romance scams, so usually start with an innocent text or WhatsApp message. After the mark responds, the scammer works to develop a personal relationship with the victim, often sending photos and the like, before convincing them to invest in a cryptocurrency "opportunity."

While the investment companies' names and websites may sound and look similar to legitimate firms, they are, of course, bogus. And once the victim contributes funds, the money is routed to a scammer-controlled cryptocurrency wallet. When victims they try to withdraw funds, they are sometimes required to pay "taxes," yet another attempt by the fraudsters to steal even more money from the victims.

"Eventually, most victims are completely locked out of their accounts and lose all of their funds," the court documents state.

Jenny, I've got your number

In one case detailed in the warrant, a female named "Jenny" approached the victim, a retiree identified as "JZ" on Facebook. She claimed to be an expert in gold spot trading, and after corresponding with JZ, introduced him to a trading platform where her "friend" was the CFO. 

Jenny claimed to have $3 million in her account, and sent JZ screenshots showing large profits from her phony trades. After convincing him to open an account with a minimum balance, ​​"Jenny told JZ he could have financial freedom if he deposited more funds," the court documents state.

By March 2022, JZ had deposited $1.1 million, and his "trading gains" boosted his account to $2.4 million. However, after a series of "very aggressive trades," JZ lost it all. Jenny promised JZ if he came up with $300,000, she would loan him $650,000 to make up for his losses.

JZ added the funds, plus another $100,000 from his retirement account that he had previously refused to touch, and was back up to $2.8 million — until he made a withdrawal request.

At this point, JZ's account was frozen, and he was told he needed to pay a $466,000 "verification fee" to unfreeze it. So he paid up. Then, he had to pay another $230,000 for "final verification." 

After that, JZ tried to withdraw $50,000 from his account, but was told that, due to "blockchain congestion" he couldn't withdraw the funds unless he deposited another $99,000 to become a "VIP member" of the trading platform. Again, he deposited the additional money. 

And then the scam abruptly stopped. JZ tried to contact the platform but no one responded. Jenny blocked JZ from her social media accounts and never talked to him again.

JZ lost his entire investment: about $2.36 million.

The court documents detail each victims' story, and trace the funds into the various accounts that are subject to the seizure warrant — although the latter, including wallet addresses and diagrams tracing the funds, is heavily redacted.

"Now that we have seized this virtual currency, we will seek to swiftly return it to victims," Assistant US Attorney General Kenneth Polite, Jr., said in a statement.

In 2022, investment fraud caused the highest losses of any scam reported by the public to the FBI's Internet Crimes Complaint Center, totaling $3.31 billion, with pig butchering and other cryptocurrency fraud representing the majority of these [PDF].

And it's a growth industry; crypto scams increased 183 percent from 2021 to 2022, with $2.57 billion in reported losses last year. ®