U.S. bid to keep $163M in cryptocurrency provides glimpse into ‘pig-butchering’

It started with a message on LinkedIn.

She said her name was Anna and that she was working on a project in Toronto for a tech company. She said she had noticed improper large-volume trading in a cryptocurrency and it was the chance of a lifetime.

An Ypsilanti man identified in court documents only as D.C. apparently believed her. He opened accounts with Coinbase and Crypto.com when she told him to and then transferred the money into what she said was an offshoot of the cryptocurrency derivatives trading platform Deribit.

It wasn’t.

When it looked like he’d lost everything, he took her advice to reinvest. When his apparently profitable account was supposedly frozen, flagged for possibly illegal transactions, he paid tens of thousands of dollars to unfreeze it like she told him she’d done.

He lost close to $500,000.

He’d fallen prey to a scam called pig butchering, characterized by its combination of “prolonged emotional manipulation and sophisticated fraudulent investment schemes,” according to one recent study.

The details of the case come from a complaint filed this month in U.S. District Court for the Eastern District of Michigan, seeking the forfeiture of nearly $163 million in more than a dozen different cryptocurrencies in an overseas account seized by the federal government during a criminal investigation in 2022. Forfeiture would make the money government property.

It’s unclear where a broader criminal case might stand. A spokesperson for the U.S. Attorney’s Office for the Eastern District of Michigan declined to provide any additional information. The seizure doesn’t appear to match other high-profile pig butchering cases, and the scammers whose names and pseudonyms are included in the forfeiture complaint don’t appear to be defendants in other federal court cases.

But the document does provide a rare glimpse into the inner workings of a scam that has grown with the rise of cryptocurrencies and of organized cyberfraud operations overseas and that often robs its victims of huge sums of money.

“They call it pig butchering because the process that the scammer follows here is similar to what you would do in raising a pig for slaughter,” said Rajvardhan Oak, a doctoral student at the University of California at Davis who has interviewed pig butchering victims and published research on the structure of the scams. “You fatten up a pig so it’s a better slaughter for you.”

A Canton man identified only a P.N. received a text from a woman he didn’t know. She said her name was Susan and that her mother had told her to contact him about the possibility of marriage.

He said she had the wrong person, according to the complaint. She apologized but kept contacting him, eventually adding him to her friend group in the messaging app Line.

Text messages supposedly sent in error are among the most common entries into pig butchering scams.

“The scammer will initiate contact with you and will build up a relationship with you. They will try to be your friend. Some might try to build romantic relationships. Some of them might try to build professional relationships,” Oak said.

“The difference between this and any other virtual scam is that this phase of building a connection or building a relationship, it lasts for months,” he said.

Susan, who said her Chinese name was Huiming Chen, eventually told P.N. that she had an uncle doing cryptocurrency investment analysis who would tell her when to make trades.

She helped P.N. install an app on his phone to open an account with Penzo, a cryptocurrency broker later accused of perpetrating fraud against consumers by California’s Department of Financial Protection and Innovation.

Scammers will steer their victims toward websites they control, Oak said, which allows them to create the illusion of quick and easy profits and conveniently timed losses.

“Those are scammer-controlled websites,” he said. “So when people start seeing wild gates on whatever they have put in, that’s because the scammer controls the website. They can just show people whatever numbers they want.”

In P.N.’s case, he seemed to be earning close to 20% profit on his initial investment, according to court documents, and after several trades, Susan encouraged him to invest more. He borrowed $280,000 and added close to $400,000 of his own money.

“Soon thereafter, his Penzo account had apparently doubled and was worth approximately $1.27 million,” the complaint said.

On one of the next trades, he lost everything. Susan stopped responding to his messages.

The federal government tracked at least two transfers out of his Coinbase account totaling nearly $123,000. The money was converted to USDC, a cryptocurrency stablecoin, at Susan’s direction, according to the complaint, then converted into another cryptocurrency called Tether and then “then rapidly transferred into and out of multiple intermediary wallet addresses.”

A portion of it ended up in the account the U.S. government seized, the account it is now seeking to obtain through civil forfeiture, arguing that it is part of a money laundering operation.

That account was linked to an individual in Thailand identified in court documents only as Person A, who brokered cryptocurrency transactions, funded accounts in casinos with cryptocurrency and exchanged cryptocurrencies for Thai Baht.

Person A has entered into an agreement with the U.S. government, “disclaiming any interest” in the millions in cryptocurrency in the account, according to the complaint.

Pig butchering scams seem to have originated in China at the end of the 2010s. Most still seem to originate from Asian countries, and, in many instances, are perpetrated by individuals who have been trafficked and forced to participate in the scam.

In 2023, the United Nations estimated that there were 220,000 individuals being forcibly held in compounds in Cambodia and Myanmar alone operate these scams.

A study by University of Texas researchers published last year, estimated that pig butchering scams had cost victims across the globe somewhere between $16 billion and $33 billion annually since 2020.

Oak said he asked the victims of pig butchering scams he interviewed why they thought they’d fallen for it, what made the scammers believable.

The answers that stood out, he said, was “the long time that the scammer took to groom the victim and the intricacy with which they had built their persona with photos, video calls, social media profiles.”

“If you met someone online and you’ve spoken to them for six months without any mention of or without any pressure from them to invest in crypto and they have these socials and everything, then it’s quite likely that you’re doing to think that this person is real.”