Like many online scams, cryptocurrency fraud comes in different forms. A very popular type of crypto scam is known as “pig butchering.” In this type of scam, fraudsters carefully work to build close, trusted relationships with victims in order to “fatten up” victims’ crypto portfolios. Once the victims have deposited substantial amounts of funds into their accounts, the scammers will then drain the accounts and disappear with the victims’ assets. What can you do if you believe you are the victim in one of these scams?
“Pig butchering” scams are especially insidious because their foundation is the development of trusted relationships with the victims. These relationships take many forms, including romantic. Typically, scammers initially contact victims through social media, dating apps, or text messaging platforms. Sometimes, they make initial contact through feigned “wrong number” messages.
These scammers create elaborate fake identities to build trust over time. They may claim to have investing expertise or connections. After developing rapport with their victim, the scammer will pitch an investing opportunity involving a purchase of cryptocurrency on a virtual platform. These platforms may appear legitimate but are actually controlled by the scammers, allowing them full control over victims’ funds.
These platforms often use legitimate applications from third-party websites to further manipulate victims. Scammers will also request remote access or screenshots of victims’ devices to further steal information and gain control. Additionally, scammers often request that victims purchase cryptocurrency through wire transfers to international accounts, prepaid cards (like gift cards), and cryptocurrency kiosks.
After the victim buys cryptocurrency, the scammer has them “invest” those funds through scammer-controlled platforms. They may pressure victims to invest by exploiting their relationships, inventing deadlines to create time pressures, and promising high returns with fabricated evidence of success. Often, scammers will provide victims with fabricated profits or returns, giving the false impression that the victims’ “investments” are performing extremely well, motivating victims to make further deposits.
“Pig butchering” scams are long-term frauds. Scammers will continue to ask for more “investment” over time. When payments slow down, the scammers employ more aggressive tactics. If the victim attempts to withdraw funds, the scammer may request, as a condition of withdrawal, early withdrawal fees or payments for “taxes.” Finally, when the victim refuses to invest more, the scammer will suddenly disappear with all their funds.
Stop communicating with the scammer immediately. Do not send any messages that would tip off the scammer to your knowledge. Before anything else, switch to new, complex passwords on any account the scammer may be able to access. Then, block and report accounts the scammer used to communicate. Write down details of the incident too, e.g., when and where you were contacted, where you sent funds and how much you sent, and who you talked to. Collect screenshots of conversations if they are available.
If you suspect you are in the early stages of a “pig butchering” scam, you may still be able to withdraw your funds. If you can, withdraw all your money immediately, change any login credentials and passwords to accounts the scammers may have access to, and block their contacts.
Once the scammer has disappeared with a victim’s funds, it is almost impossible to recover those funds because the transfers occur through anonymous blockchain transactions. Since these transfers are often irreversible, it is essential to mitigate further loss by changing credentials, blocking scammers, and monitoring bank accounts, credit cards, and credit reports for fraudulent transactions.
Yes, you can report the scam to the federal government and local law enforcement. The FBI has an Internet Crime Complaint Center for reporting cyber-crimes, including cryptocurrency scams. Any information or evidence you collect is helpful for substantiating your report in this complaint. Depending on your jurisdiction, local law enforcement might also be equipped and willing to investigate these types of crimes. Reporting the fraud to the cryptocurrency exchange or financial institution used to facilitate the transactions between you and the scammer is an important step as well. Even where these institutions cannot help with recovery of funds, reporting the scam may help them prevent similar fraud in the future.
Unfortunately, it is unlikely that these reports will lead to recovery, primarily because of the challenges in identifying and locating the scammers. However, when fraud is reported early and with substantial evidence, the likelihood of recovery improves, if only marginally.
It is possible, but very difficult to sue this type of cryptocurrency scammer. You must determine the true identities and locations of the scammers to sue them, but this is very challenging given their very likely fake online personas. If they can be identified, scammers are frequently located overseas, and suing a foreign individual is an expensive and time-consuming endeavor, if it is possible at all.
The most promising legal action to recover funds lost in cryptocurrency scams is to start or join a class action suit against scammers or financial institutions and cryptocurrency exchanges that facilitated the fraudulent transactions. For additional resources and information on legal action and recovery, see our other posts, Avoiding and Redressing Cryptocurrency Scams and Can You Sue a Cryptocurrency Exchange?
The most important precaution to take to avoid similar scams is to understand what these scams look like, and to never give out financial information or transfer funds to someone you meet online.
Unfortunately, there are also scams in which a person or company claims to help people recover cryptocurrency lost to fraud. Exercise extreme caution when paying money or providing any personal information to a so-called “recovery service.”
Given the complexity of these issues, it is important for a cryptocurrency user or investor to consult with an attorney concerning best practices in the cryptocurrency space. Contact us to speak with a member of our team.