Pig butchering

Crypto catfishers ditch fake exchanges for approval phishing scams

According to on-chain analytics firm Chainalysis, romance scammers increasingly use this method to steal their victim’s hard-earned crypto.

Crypto romance scammers — a cohort of crypto-stealing smooth-talkers — appear to have a new trick up their sleeves: targeted approval phishing.

In a Dec. 14 report from on-chain analytics firm Chainalysis, the firm noted that the technique has seen explosive growth over the past two years, with at least $374 million in suspected stolen crypto in 2023.

Approval phishing is a crypto scam where victims are tricked into signing transactions that give scammers access to wallets, allowing them to drain funds. While this isn’t new, Chainalysis said the technique is now utilized more often by pig-butchering scammers.

California regulator launches complaint-based crypto scam tracker

The regulator receives thousands of consumer and investor complaints about possible crypto scams each year, and it appears it’s done something with the information.

The California Department of Financial Protection and Innovation has launched a new crypto scam tracker to help traders and investors spot possible industry threats.

zDFPI launched the tracker on Feb. 16. It’s based on user complaints, with the department compiling a list of crypto-related grievances by victims who claim to have been scammed or have identified attempted scams.

The complaints listed represent descriptions of losses incurred in transactions that victims have identified as part of a fraudulent or deceptive operation. However, the DFPI stated that it had not verified any of the scams listed, but noted that it receives thousands of consumer and investor complaints each year.

*The latest scams listed on the new scam tracker. Source: DFPI*

“Scammers are in the shadows using the public’s interest in crypto assets to take advantage of the most vulnerable Californians,” said DFPI Commissioner Clothilde Hewlett. She added that the department was taking action to identify them:

“Through the new Crypto Scam Tracker, combined with rigorous enforcement efforts, the DFPI is committed to shining a light on these ruthless predators and protecting consumers and investors.”

The majority of the 36 complaints already listed in the tracker were social media and social engineering scams where users have been duped into taking action via scams on Facebook, WhatsApp, Instagram, TikTok and dating apps.

Four-fifths of them were what the DFPI refers to as “pig-butchering scams,” which are essentially social engineering attempts by scammers trying to establish a relationship and trust with the victim.

DFPI spokeswoman Elizabeth Smith said that “We have heard from consumers that scam alerts help them avoid similar scams.”

Imposter websites are also one of the most commonly reported scams, according to the DFPI. “When companies or websites (fake or not) have a look- or sound-alike names, the potential confusion created for consumers is real,” it said.

The tracker also has a search function enabling users to look up potentially fraudulent websites or crypto projects in advance.

Crypto scammers feel the chill: Revenue drops 46% in 2022 — Chainalysis

Falling crypto prices caused crypto scam revenue to plummet in 2022, but two scam types managed to persist.

Crypto scam revenue was slashed by almost half in 2022 due mainly to falling crypto asset prices, but two scam types managed to stay immune.

Crypto scam revenue in 2022, which includes investment scams, NFT scams and romance scams, among others, amounted to $5.9 billion in the year — down 46% from 2021.

The data came from a Feb. 16 crime report from Chainalysis, which attributed most of the decline in scam revenue to poor market conditions, as lower crypto prices generally result in lower scam performance.

*Yearly crypto scam revenues from 2017-2022. Source: Chainalysis.*

Chainalysis however pointed to two different scam types that managed to stay relatively immune to the price falls — romance scams and giveaway scams.

“Scam revenue throughout the year tracks almost perfectly with Bitcoin’s price, consistently maintaining a three-week lag between price moves and changes in revenue. However, not every distinct type of scam follows this pattern — some types of scams see revenue changes increase as crypto asset prices decrease,” explained the firm, adding:

“For instance, unlike other kinds of scams, romance and giveaway scams don’t show a positive correlation with Bitcoin’s price.”

Romance scams, while having lower overall revenue as a category, racked up the highest average victim deposit size in the year — with the average victim losing just under $16,000, nearly 3x more than the next biggest scam type.

*Average losses for victims throughout 2022 by scam type. Source: Chainalysis.*

Romance scams typically involve building a relationship with the victim, with the scammer convincing them that they need their help.

Chainalysis said that these scam types are most likely to persist when crypto prices are down because it’s playing to a victim’s compassion rather than greed.

“That kind of emotional pitch is probably equally effective regardless of trends in the wider market, because the victim’s primary goal isn’t to get rich quick, but rather to help someone they believe to be a potential romantic partner,” the firm wrote.

Romance scams, and particularly “pig-butchering” scams, have been seen as a growing area of concern within crypto.

For example, a United Kingdom investigation published on Jan. 29 found that half of all crypto companies involved with scams in the state were linked to pig-butchering scams.

New Jersey enforces cease and desist orders against three ‘pig butcher’ scammers

These cybercriminals reach out to romance-seekers from dating apps like Tinder before convincing them to invest in their fraudulent cryptocurrency investment schemes.

The New Jersey Bureau of Securities has ordered three website operators to stop luring romance-seeking victims into their fraudulent cryptocurrency investment schemes.

The three firms hit with the cease and desist orders were Meta Capitals Limited, Cresttrademining Limited and Forex Market Trade, according to a Feb. 3 press release from New Jersey’s Attorney General Matthew Platkin.

All three firms claimed to be cryptocurrency trading platforms, where they would entice victims into copying the trades of their “expert traders” so that they could make big returns.

These firms bring in victims by reaching out to romance seekers on dating apps like Tinder through what is known as the “pig butchering” scam.

Online scammers are taking advantage of investors in a new scam known as “pig butchering” where victims are “fattened up” before scammers take all they can. With today’s cease and desist orders we’re protecting NJ from cryptocurrency fraud. https://t.co/Q6xX5l4Ohk

— Attorney General Matt Platkin (@NewJerseyOAG) February 3, 2023

“Pig butchering” is a scam where cybercriminals use social media to contact victims, instigate a romantic relationship and then lure them into a fraudulent cryptocurrency investment scheme once they’ve gained their trust.

Platkin said they’re working hard to protect New Jersey residents getting lured into the investment scam:

“These scammers build up a sense of comradery between them and their victim—all to squeeze every cent they possibly can out of these people with promises of huge returns on investments.”

“We are working around the clock to protect the victims of these types of scams and to show these scammers our laws still apply in cyberspace,” Platkin added.

Acting director Cari Fais of the bureau’s consumer affairs division also hopes that the enforcement actions will make it clear that they will “pursue scammers who prey on people’s trust.”

The crackdown comes as the United States Federal Bureau of Investigation reported about 4,300 victims to have lost a combined $429 million from pig butcher scams alone in 2021. No statistics have been released yet for 2022.

Chief of the Bureau of Securities Amy Kopleton suggested that the pig butcher scam works well for fraudsters because their target audience is already in a position of vulnerability:

“Even the savviest of investors can have a hard time recognizing fraud when it’s being perpetrated by someone for whom they have a romantic interest.”

The bureau said that the companies hit with the cease and desist orders were also found to have violated New Jersey securities laws by offering and selling unregistered securities.

On top of that, Meta Capitals Limited and Cresttrademining Limited were also found to operate as unregistered broker-dealers.

Pig butcher scams aren’t just running rampant in the United States.

A recent investigation by the United Kingdom Bureau of Investigative Journalism found that of the 168 forex companies it considered to be engaging in fraudulent activity, about half of them linked to pig butchering-like scams.

Crypto ATMs emerging as popular method for crypto scam payments — FBI

The FBI says alongside regular methods of payment such as wire transfers and prepaid cards, crypto ATMs are also becoming a prominent tool for crypto investment scammers.

The United States Federal Bureau of Investigation’s (FBI) Miami Field Office has warned that crypto ATMs are emerging as a popular method that scammers use to receive funds from defrauded victims.

The information was revealed as part of an Oct. 3 public warning about “pig butchering scams,” where scammers pose as long-lost friends or potential romantic partners to swipe money from victims.

The scammers “fatten up” their victims by showing a supposedly genuine interest in them to win their trust, and then gradually introduce investment discussions into the relationship.

In the public service announcement in cooperation with the Internet Crime Complaint Center, the FBI warned that victims of these pig-butchering crypto scams generally have no chance of getting their funds back.

However, the FBI noted that they’ve noticed scammers have been increasingly directing their victims to transfer funds via crypto ATMs, alongside more well-known methods such as wire transfers and prepaid cards, noting:

“Many victims report being directed to make wire transfers to overseas accounts or purchase large amounts of prepaid cards. The use of cryptocurrency and cryptocurrency ATMs is also an emerging method of payment. Individual losses related to these schemes ranged from tens of thousands to millions of dollars.”

The FBI noted that in “pig butchering” scams, victims are “coached through an investment process” and “encouraged to make continuous deposits by the fraudsters.”

“When the victims attempt to cash out their investments, they are told they need to pay income taxes or additional fees, causing them to lose additional funds.”

Crypto ATMs have long been utilized by scammers who pose as public officials, law enforcement agents or employees of local utility companies, and coerce victims to send them payments under the guise of paying off bills or unpaid taxes to avoid further penalties.

There are nearly 33,500 cryptocurrency ATMs in the United States, according to data from Coin ATM Radar, with the U.S. accounting for 87.4% of the global crypto ATM distribution.

The U.S. Federal Trade Commission sent out a warning regarding crypto ATM scams in January, while also noting that the scammers do sometimes pose as potential romantic partners.

The FBI urged people to “verify the validity of any investment opportunity” introduced by these types of people, keep an eye out for domain names impersonating legitimate exchanges and misspelled URLs, and not download any apps if the legitimacy cannot be verified.

Law enforcement agencies across the U.S. have warned about pig butchering and romance scams on several occasions. While it could be assumed that the victims are not well-educated regarding technology or investing, this isn’t always the case.

In June, it was reported that tech-savvy professionals from Silicon Valley were being duped by a wave of pig butchering scams in San Francisco, with multiple people losing more than $1 million apiece to this type of financial fraud.