A vicious cryptocurrency scam known as “pig butchering” that lures investors online with the promise of huge profits and then spits out their savings has cost New Yorkers more than $10.5 million in the past year, Brooklyn prosecutors say. It was announced on Thursday.
Brooklyn District Attorney Eric Gonzalez said the “pig butchering” operation was monetized on social media through dating apps, text messages and online chat groups, before offering large profits through fake cryptocurrency websites. He said he is trying to build relationships.
If the target attempts to withdraw their investments, they are blocked and the funds disappear through a network of overseas wire transfers. Operators often use boiler room-style call centers staffed by people forced into foreign labor to market their targets.
“[The term refers to] That's when the pigs fatten up before they're slaughtered,” Gonzalez said. “It's a slow process to hold yourself accountable, and it's a slow process to earn people's trust and encourage them to invest. That's credit fraud.”
He said more than $4 million has been lost in the past six months in Brooklyn alone. Nationally, the FBI estimates that this fraud has cost the public more than $3 billion.
In 2023, the NYPD received 50 complaints, more than half of them from Brooklyn residents, but the actual number of people scammed is believed to be much higher, meaning the amount stolen was far greater. Gonzalez said that means more people.
Gonzalez said the money is nearly impossible to recover and arresting the actors is equally difficult because they are overseas. He urged anyone who has been scammed to report it to the New York City Police Department or the State Police's Cryptocurrency Unit.
The effort began in March 2023 after a 51-year-old woman reported to the NYPD that she had lost $22,680 in fraud.
Prosecutors said she downloaded the app from a site called coinformat.com and made eight deposits. Her profits soared to $387,495, but when she tried to withdraw her initial investment, she was blocked from chatting with her group. My money has disappeared.
The women's investments were exchanged through various crypto addresses and ultimately deposited into offshore cryptocurrency exchanges. It was then cashed in, probably by someone in China, prosecutors said.
The same operation defrauded people in California, Pennsylvania, Texas, and Illinois, resulting in a total loss of $366,665. This incident resulted in more victims and a network of 80 internet domains linked to coinformat.com. Total losses from this fraud exceeded $1 million.
“Returns on investment that seem too good to be true are almost always just fake,” Gonzalez says. “I urge everyone to be extremely skeptical of anyone you have not met in person who offers you a lucrative investment opportunity in cryptocurrencies.”
Gonzalez said cunning scammers often allow people to withdraw small amounts, but block larger withdrawals.
“They'll say you'll have to pay taxes, or you'll have to pay a fee, or you'll have to send another $35,000,” he says. “Some people actually borrowed more to recoup their initial investment.”
In a video played Wednesday, a woman said she met a man on the dating site Bumble who offered her more than $110,000 to invest.
“I couldn’t get my money back,” she said. “Listen to your gut, that’s what I like to tell people.”
The second woman said the man who targeted her feigned romantic interest and tried to use information about her to manipulate her. She says she lost $106,000. “My advice is not to get involved,” she said in the video.
Activities abroad are typically beyond the reach of U.S. law enforcement. “Workers” are often people who have been forced or trafficked, in some cases literally chained to their desks, said Alona Katz, head of the DA's Virtual Crimes Unit.
Targets are typically asked to visit a website and download an app to conduct a transaction. Even apps are infected with malware and can reveal people's private communications and passwords, Katz said.
Katz said social media companies could do more to weed out fake accounts or accounts that all originate from the same device.
“We are in direct contact with some social media companies, but their accounts disappear within 24 hours,” Katz said. “Other companies are even more reluctant to accept our complaints.”
During the investigation into Coinformat.com, Gonzalez said, prosecutors took control of 21 Internet domains and slapped a screen on each one indicating it had been seized by authorities.
“We are shutting them down as soon as we learn about them,” he said. “The bad news is there are more scammers out there.”
Mr. Gonzalez offered a series of tips to avoid scams. These include not investing online with strangers, conducting a background check if contacted by a cryptocurrency company, and checking with the prosecutor's office.
Red flags include receiving a text message from a stranger boasting about large sums of money, being unexpectedly added to a cryptocurrency chat group, or being asked to download an app from an unknown company.