Protecting Yourself Against the "Pig Butchering" Virtual Currency Scam: What You Need to Know
By R Tamara de Silva
Introduction
Cryptocurrencies have exploded in popularity and are collectively said to be worth above $1 trillion. What has also boomed are investment scams involving virtual currencies. The Financial Crimes Enforcement Network (FinCEN), a U.S. Department of the Treasury bureau, issued an alert concerning a scam methodology known as "pig butchering." This blog post aims to unpack the details of this alarming scam, the red flags you should be aware of, and what you can do to protect yourself.
What is "Pig Butchering"?
The term "pig butchering" comes from the practice of fattening a hog before slaughter. This is metaphorically what happens to the victims of crypto scams. In these scams, the victims, or "pigs," are led to believe they are entering into trusted partnerships. Using fictitious identities and elaborate storylines, scammers lure victims into investing in virtual currencies or over-the-counter foreign exchange schemes. Once the victim's assets are secured, the scammers abruptly cut off contact, leaving the victim with substantial financial and emotional losses.
Who is Behind These Scams?
The primary perpetrators are criminal organizations based in Southeast Asia. These organizations often use victims of labor trafficking to reach out to unsuspecting individuals globally. According to U.S. law enforcement agencies, American victims have lost billions of dollars to these scams and other types of virtual currency investment frauds.
Methodology of the Scam
Initial Contact
Scammers typically initiate contact through text messages or direct messages on social media platforms, often claiming to be an investor or a long-lost friend. They establish trust over time, building a relationship with their victims.
The "Investment" Sales Pitch
Once trust is established, the scammer introduces the victim to a supposedly lucrative investment opportunity in virtual currencies or other schemes. Often, these scammers create fake investment websites or mobile apps that appear legitimate.
The Promise of Greater Returns
After the victim makes an initial investment, the scammer shows them fabricated high returns on that investment to lure them into investing more.
The Point of No Return
When the victim is unwilling or unable to continue investing, the scammer ceases all communication, taking with them all the funds invested by the victim.
Red Flags and Indicators
FinCEN has highlighted several behavioral, financial, and technical red flags that could indicate involvement in a "pig butchering" scam:
Behavioral Red Flags
- Sudden interest in virtual currencies from someone with no prior experience.
- Mentioning an investment opportunity learned from an unsolicited new contact.
Financial Red Flags
- Liquidation of savings accounts to wire money to virtual asset service providers (VASPs).
- Using home equity lines of credit (HELOC) for purchasing virtual currency.
Technical Red Flags
- Multiple logins from unique IPs and geographies inconsistent with prior access patterns.
- Use of poorly-designed apps or websites with grammatical errors and dubious testimonials.
How to Protect Yourself
1. Verify Identities: Always verify the identity and credentials of people you are dealing with, especially if the relationship starts online.
2. Conduct Due Diligence: Before making any investments, do your own research into the legitimacy of the investment opportunity and the platform. There are many resources available in the public domain. Our book entitled, Don’t Be The Mark; Know Your Alleged Investment Opportunities, we outline several steps you can take to perform your own due diligence. The book is available here: www.dontbethemark.com
3. Consult Professionals: Consult with financial advisors and legal experts familiar with virtual currency investment. Call this office to schedule a consultation and due diligence before making any investment decision that may look too good to be true.
4. Report Suspicious Activity: If you suspect that you are a victim of such a scam, report it to the authorities immediately.
Conclusion
The "pig butchering" scam is a pressing concern, particularly for individuals who are new to the world of virtual currency investment. Awareness and education are the first steps towards protection. Understanding the red flags can save you from falling victim to such devastating scams.
For more legal advice and information on how to protect yourself against such scams, feel free to the De Silva Law Offices as we specialize in securities investment consulting.
R Tamara de Silva
> This article is for informational purposes only and does not constitute legal or financial advice. Always consult with a qualified professional before making any investment.
References
1. [FinCEN Alert on Prevalent Virtual Currency Investment Scam Commonly Known as “Pig Butchering”](https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets)
2. [Bank Secrecy Act (BSA)](https://www.fincen.gov/history-anti-money-laundering-laws)
3. [FinCEN’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) National Priorities](https://www.fincen.gov/resources/advisoriesbulletinsfact-sheets)