Crypto ‘Pig-Butchering’ Scam Evolving into a National Security Threat—Study

The world of cryptocurrency has brought about myriad investment opportunities, but it has also paved the way for sophisticated scams that target unsuspecting victims. One alarming trend gaining momentum is a type of fraud dubbed “pig-butchering.” This predatory scheme, which frequently entrapped individuals online, involves methodical grooming and manipulation, ultimately leading victims to invest in fictitious cryptocurrency projects. With reports indicating that scammers siphoned close to $10 billion through crypto scams in 2024, the implications of pig-butchering are becoming impossible to ignore.

According to Chainalysis, pig-butchering revenue surged nearly 40% year-over-year, coupled with a staggering 200% increase in the number of deposits into these scams. Interestingly, while the average deposit amount decreased by about 55%, the structure of this scam model has evolved, increasingly relying on numerous victims who part with smaller sums. This shift not only makes these operations more lucrative, but it complicates efforts to trace the perpetrators, posing a heightened challenge for investigators.

Organized Networks Behind The Scams

Law enforcement and researchers clarify that these scams are rarely the handiwork of individual scammers operating in isolation. Instead, they are often orchestrated by sophisticated criminal networks resembling organized crime syndicates. Investigations reveal that these operations may employ trafficked workers housed in compounds, who are responsible for communicating with and managing victims through various channels.

The fraudulent grooming process can last anywhere from weeks to months, during which emotional manipulation is wielded deftly to create bindings between the scammer and the victim. These extensive operations have links to certain regions in Southeast Asia, where groups have been observed funneling illicit funds across a network of concentrated crypto wallets—a crucial element that supports their criminal undertakings.

AI And Marketplaces Help Scammers Scale

In a rapidly changing landscape, advancements in technology have equipped scammers with powerful tools. Analysts and law enforcement officials are raising alarms over how generative AI and various online service markets are transforming pig-butchering scams into operations that are cheaper, faster, and more effective.

The integration of AI enables the creation of compelling chatbots, realistic voice clones, and convincing fake profiles that can easily lure victims into a false sense of security. Further, online marketplaces offer domain services and hosting solutions, enabling scammers to erect lifelike investment websites in a matter of hours. This synergy of technology allows scam networks to broaden their reach, targeting increasingly large audiences simultaneously.

Infrastructure And Sanctions

As these scams proliferate, authorities have begun to take decisive action against the infrastructure supporting them. The United States Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on a firm based in the Philippines, Funnull Technology, and its alleged administrator, citing their provision of internet infrastructure and tools utilized by fraud networks.

Chainalysis and other entities have linked Funnull’s services to various sites exploited in pig-butchering schemes. Allegations suggest that losses in the United States associated with these operations exceed a staggering $200 million. The intent behind such sanctions is to disrupt the web services that scammers exploit to maintain a façade of legitimacy.

Exchanges And Stablecoin Issuers Help Freeze Illicit Funds

The fight against pig-butchering scams is not solely a government endeavor; private companies have also joined forces in response. Through concerted cooperation with Asia-Pacific law enforcement, Chainalysis, exchanges, and stablecoin issuers have successfully traced and blocked nearly $47 million in Tether (USDT) that scammers had aggregated into various wallets.

Previous efforts to curb different fraudulent activities have led to even larger sums being frozen, reflecting the collaborative spirit of both the public and private sectors. These actions exemplify how industry cooperation can significantly impede criminals, preventing their conversions of cryptocurrency into fiat currency—a vital step in hindering the financial success of their illicit activities.