Many of the scam victims' blockchain addresses were collected by Chainbrium.
Pig slaughter scammers have likely stolen more than $75 billion from victims around the world, far more than previous estimates, according to a new study.
University of Texas at Austin finance professor John Griffin and graduate student Kevin May collected crypto addresses from more than 4,000 victims of the scam, which has exploded in popularity since the pandemic. They used blockchain tracking tools to trace the flow of funds from victims to fraudsters primarily based in Southeast Asia.
In the four-year period from January 2020 to February 2024, criminal networks transferred more than $75 billion to cryptocurrency exchanges, said Griffin, who has written a book about fraud in financial markets. He said some of the total could be proceeds from other criminal activities.
“These are large organized crime networks that operate largely unscathed,” Griffin said in an interview.
Pig butchering, a scam named after the practice in which farmers fatten pigs before slaughter, often begins with what appears to be a text message with a wrong number. Those who respond are seduced into crypto investments. However, the investment is fake and once the victim transfers enough funds, the scammer disappears. It may sound far-fetched, but victims routinely lose hundreds of thousands or even millions of dollars. A Kansas banker was charged this month with embezzling $47.1 million from banks as part of a hog slaughter scam.
The people sending the messages are often victims of human trafficking from across Southeast Asia. They are lured with offers of well-paid jobs in facilities in countries such as Cambodia and Myanmar, locked up, forced to commit fraud, and sometimes beaten and tortured. The United Nations estimates that more than 200,000 people are being held in fraudulent facilities.
The study, “How Cryptocurrencies Finance Slavery? The Economics of Pig Butchering,” was published Thursday. Griffin and May discovered that $15 billion had come from five exchanges, including Coinbase, commonly used by victims in Western countries. The study found that once scammers had collected funds, they often exchanged the funds for Tether, a popular stablecoin. Of the addresses accessed by criminals, 84% of the transaction volume was on Tether.
“In the past, it would have been very difficult to move that much cash through the financial system,” Griffin said. “You have to go through the bank and follow the ‘know your customer’ procedure, or you have to bag the cash.”
Tether CEO Paolo Ardoino said the report was false and misleading. “With Tether, every move is online, every move can be tracked, every asset can be seized, every criminal can be arrested,” Ardoino said in a statement. “We are working with law enforcement to do just that.”
In some cases, Tether is cooperating with authorities and freezing accounts associated with fraud. But often, by the time the crime is reported, the scammers have already made their way to the cash.
“Our paper shows that they are the currency of choice for criminal networks,” Griffin said.
Blockchain analysis firm Chainalysis also said the total amount in the investigation may have been inflated. Blockchain Just because an address received some money from a pig butchering scam does not mean that all the money received at that address was due to fraud. “Due to limited reporting, it is difficult to quantify the amount of money received from pig slaughter scams,” Chainalysis spokeswoman Maddie Kennedy said. Tether is one of the company's customers.
Many of the scam victims' blockchain addresses were collected by Norwegian cryptocurrency research firm Chainbrium. Chainbrium also conducted its own data analysis and found that the majority of the funds were flowing through a decentralized cryptocurrency exchange called Tokenlon. According to Chainbrium, fraudsters are using exchanges to hide the source of their funds. Tokenron did not respond to requests for comment.
“My fellow Americans, their money is flowing directly into Southeast Asia, into this underground economy,” said Jean Santiago, a consultant at Chainbrium.
Ultimately, criminals send their fraudulent proceeds to centralized cryptocurrency exchanges to be converted into traditional money. Griffin said Binance and its founder Zhao Changpeng pleaded guilty to anti-money laundering and sanctions criminal charges in November and will pay $4.3 billion to resolve a long-running investigation by prosecutors and prosecutors. Even after agreeing, he said Binance is the most popular exchange. Regulatory authority.
“Binance is a place where you can move a lot of money out of the system,” Griffin said.
Like Tether, Binance is also working with law enforcement in some cases to freeze accounts associated with fraud and return funds to victims. A company spokesperson said the company recently worked with authorities to seize $112 million in pig slaughter cases.
“Binance continues to work closely with law enforcement and regulators to raise awareness of fraud, including pig slaughter,” said spokesperson Simon Matthews.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
