Unmasking Pig Butchering Scams: The $4 Billion Crypto Scheme Preying on Vulnerable Investors

Cryptocurrency fraud is on the rise, and one of the most sophisticated and damaging forms of it is pig butchering. 

Estimated to have siphoned off well over USD 4.4 billion last year alone, pig butchering scams combine psychological manipulation with crypto investment schemes to devastate victims financially. The organized, transnational nature of these scams not only exposes millions of investors to financial loss, but also reveals a dark undercurrent involving human trafficking and forced labor.

What is pig butchering?

Pig butchering, or “Shā Zhū Pán,” originates from Southeast Asia, where criminal networks operate intricate scam centers. The scam’s nickname refers to “fattening” victims up before “slaughtering” their finances. Here’s how it works:

• Perpetrators build relationships with victims, often through dating sites, social media, or messaging platforms like WhatsApp.
• Once they have gained the victim's trust, scammers introduce fake investment opportunities, frequently involving cryptocurrencies. 
• Victims are drawn into investing large sums of money in sham platforms, only to lose it all once the scammers disappear. 

Pig butchering scammers use psychological manipulation tactics to carefully nurture relationships with their targets, making them feel comfortable and trusting — in some cases, even making victims fall in love with them. This gradual process of persuasion makes it easier for victims to believe in the promised returns, convincing them to part with substantial funds.

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The economic and emotional impact of pig butchering schemes

These types of scams have a devastating impact on victims — both financially and emotionally. In 2023, the FBI’s Internet Crime Complaint Center (IC3) reported a dramatic increase in crypto-related fraud complaints in 2023, with losses totaling USD 3.96 billion — an increase of 53% over the previous year​. However, the financial impact is likely even greater, as only 15% of victims report these scams due to feelings of shame and embarrassment. 

According to TRM Labs’ 2023 Illicit Crypto Economy Report, scams and frauds accounted for around USD 12.5 billion in total crypto-related crime, with pig butchering comprising a significant portion of this amount.

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Once pig butchering scammers receive funds from victims, they typically leverage complex money laundering tactics — moving the digital assets through a series of wallets across multiple jurisdictions and exchanges, making them nearly impossible to track. 

For example, TRM Labs documented one case where a single victim’s USD 1 million was divided across 15 transactions and routed through 11 different exchanges. This sophisticated laundering, often involving Tether (USDT) on blockchains like TRON, complicates efforts to trace funds and requires advanced analytical tools to follow the money.

Many wallets linked to pig butchering scams are also associated with other types of fraud, underscoring the need for a broader, network-based approach to investigations. TRM’s research shows that 75% of wallets related to pig butchering scams exhibited signs of on-chain money laundering, often involving multiple intermediary addresses and exchanges.

Cases and statistics like these are just a couple of the reasons that TRM established the T3 Financial Crime Unit (T3 FCU) in conjunction with TRON and Tether earlier this year. T3 is a first-of-its-kind initiative aimed at facilitating public-private collaboration to combat illicit activity associated with the use of USDT on the TRON blockchain.

Pig butchering scams are typically part of organized crime operations with global reach

In Southeast Asia, organized crime syndicates manage large networks of trafficked individuals, many of whom are coerced into working as “scammers” under threat of violence. These trafficked workers often face grueling conditions, forced to work 15-hour days with little or no freedom. When they attempt to escape, they may face severe consequences, including beatings, electric shocks, or even being “resold” to other criminal operations.

September 2024 sanctions by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) against Cambodian businessman Ly Yong Phat and his conglomerate L.Y.P. Group Co., LTD shed light on such operations. 

OFAC designated several Cambodia-based properties linked to forced labor in pig butchering schemes, including the O-Smach Resort and Koh Kong Resort, where trafficked workers have been forced into scam operations. Victims report having their passports and phones confiscated and enduring harsh punishments if they refuse to work. The Treasury’s report also highlighted endemic corruption that allows these operations to continue unchecked in countries like Cambodia​.

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International sanctions and enforcement actions

In recent years, sanctions have become a crucial tool in disrupting pig butchering and other crypto-related scams. OFAC’s aforementioned actions against Ly Yong Phat’s network marked a significant step in addressing these criminal enterprises. But OFAC is not alone; the UK's HM Treasury also issued sanctions in 2023 targeting entities in Cambodia, Myanmar, and other countries for human rights abuses tied to pig butchering scams.

The US Department of Justice (DOJ) has also initiated several high-profile forfeiture actions to recover millions in stolen funds. In Massachusetts, the DOJ sought to seize USD 2.3 million in fraud proceeds held in various cryptocurrencies, tracing these to accounts at major exchanges like Binance. Through collaboration with exchanges, these enforcement actions lead to the freezing of funds before they can be withdrawn by scam operatives, offering a lifeline for victims.

Breaking the pig butchering scam cycle

While enforcement is vital, it is critical to take preventive measures to disrupt these scams before they reach new victims, including: 

Running public awareness campaigns

Public and private agencies should work together to educate the public about the tactics scammers use — especially the emotional manipulation and “fattening” process — to help prevent potential victims from falling prey to pig butchering scams.

Enhancing monitoring at crypto exchanges

By using blockchain intelligence, exchanges and other platforms can more readily identify suspicious transaction patterns, allowing them to disrupt pig butchering networks more effectively. This could involve flagging transactions that involve high-risk wallets or unusual movement patterns between exchanges.

Global collaboration

Given the international nature of these scams, cooperation between public law enforcement agencies and private companies worldwide is essential. Countries with known scam centers, such as Cambodia and Myanmar, need to implement stricter oversight and crack down on the trafficking networks fueling these operations.

Chainabuse

Ongoing reporting is also critical in preventing pig butchering scams. In May 2022, TRM Labs announced the launch of a new community-powered scam reporting platform, Chainabuse, which empowers anyone in the crypto economy to warn others about scams, hacks, or other fraudulent activity as they encounter it. The free tool enables crypto users, victims of scams, and crypto businesses to take an active role in making the crypto ecosystem a safer place to operate, with over 700,000 reports submitted to date. 

A multi-pronged approach is critical to preventing pig butchering

The fight against pig butchering scams is an uphill battle. Yet, with sustained efforts from international bodies, law enforcement agencies, and blockchain intelligence firms like TRM Labs, there is hope to dismantle these complex criminal networks. While total eradication may be elusive, strengthening public awareness, refining monitoring capabilities at crypto exchanges, and enhancing collaboration are crucial steps toward protecting individuals worldwide from these devastating schemes. 

If you believe you are a victim or at risk of a scam, TRM Labs encourages reporting to local law enforcement and using platforms like Chainabuse for support.