‘Pig butchering’ web crypto scams burned state investors for $10.5M
A devious crypto-currency scam called “pig butchering” that involves luring investors online into coughing up their savings in the hopes of big returns has cost New Yorkers more than $10.5 million over the past year, Brooklyn prosecutors said Thursday.
Brooklyn District Attorney Eric Gonzalez said “pig-butchering” operations reach out to their marks on social media, through dating apps, text messages and online chat groups and try to build a relationship before offering them big returns through a fake cryptocurrency website.
When the targets try to withdraw their investments, they are blocked and the money disappears through a web of overseas electronic transfers. The operators often use boiler-room style call centers staffed with people being coerced into the work in foreign countries to pitch their targets.
“[The term refers to] when a hog is fattened up before they are going to slaughtered,” Gonzalez said. “It’s a slow process to put the weight on the hog and it’s a slow process to earn people’s trust to get them to invest. It’s a confidence scam.”
In Brooklyn alone, he said more than $4 million was lost in the past six months. Nationally, the FBI has estimated the scam has cost people over $3 billion.
While the NYPD received 50 complaints in 2023, more than half from Brooklyn residents, the actual number of people scammed is believed to be much higher, meaning the amount stolen is far larger, Gonzalez said.
Gonzalez said the money can be next to impossible to recover and since the actors are overseas, it’s equally hard to make arrests. He urged anyone who has been scammed to report it to the NYPD or the DA’s Virtual Currency Unit.
The initiative had its beginnings after a 51-year-old woman reported to the NYPD in March 2023 she lost $22,680 in the scam.
She had downloaded an app from a site called “coinformat. com” and made eight deposits, prosecutors said. Her profits rose sharply to $387,495, but when she tried to withdraw the initial investment, she was blocked from the chat group. The money disappeared.
The woman’s investment was shuttled through various crypto address and finally deposited in an overseas cryptocurrency exchange. It was then cashed by someone, possibly from China, prosecutors said.
The same operation scammed people in California, Pennsylvania, Texas and Illinois, who lost a combined total of $366,665. That case led to more victims and a network of 80 internet domains linked to coinformat.com. The total loss from the scam was more than $1 million.
“Investment returns that seem too good to be true are almost always just that — fake,” Gonzalez said. “I urge everyone to be very skeptical of anyone who they haven’t met in person and who offers a lucrative investment opportunity in cryptocurrency.”
Gonzalez said the wily scammers will often allow people to make small withdrawals, but blocked them on larger amounts.
“They will say you will incur taxes, or tell you you have to pay a fee, send us $35,000 more,” he said. “Some people have actually borrowed more money to try to recover their initial investments.”
In a video played Wednesday, a woman described how she met a man on the Bumble dating site who talked her into investing more than $110,000.
“I was never able to get my money back,” she said. “Listen to your gut is what I would tell people.”
A second woman said the man who targeted her posed as a romantic interest and used information about her to manipulate her. She lost $106,000, she said. “Do not engage is my advice,” she said in the video.
The overseas operations are usually outside the reach of U.S. law enforcement. The “workers” are often people who have been coerced or trafficked and sometimes are literally chained to their desks, said Alona Katz, chief of the DA’s Virtual Crime Unit.
The targets are usually asked to go to a website and download an app to allow the transactions to take place. Even the apps are poisoned with malware that can expose people’s private communications and passwords, Katz said.
Katz said social media companies could do a lot more to weed out fake accounts and accounts all stemming from the same device.
“Some social media companies, we have a direct line of communication with and the accounts are gone in under 24 hours,” Katz said. “Other companies are more resistance to taking our complaints.”
During the coinformat.com investigation, prosecutors shut down and took control of 21 internet domains, slapping each with a screen that showed they had been seized by authorities, Gonzalez said.