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CertiK’s latest blog details the depths of pig butchering in the crypto industry.

An increasingly common form of cryptocurrency fraud is the euphemistically named “pig slaughter” scheme. Pig slaughter involves scammers who pose as successful traders and then trick unsuspecting victims into investing with them and making incredible profits. Scammers first take the time to build trust with their victims via social media, text messages, or dating apps before promising to teach them how to multiply their life savings using cryptocurrency, forex trading, or other financial markets. After “feeding” his victims (the pigs) with promises of huge profits, the scammer then slaughters them, cuts communications, and flees with the money invested by the unsuspecting targets.

Scammers adopt a variety of disguises to establish trust in their targets, including impersonating a victim’s mutual friends or former co-workers in order to initiate what appears to be legitimate conversation. Scammers who slaughter pigs will provide fake websites and apps that allegedly allow victims to track their investments. These sites give the impression that the initial investment grows quickly. However, when victims attempt to cash out their returns, scammers delay by requesting more information or informing “investors” that they must pay income taxes or some other fee in order to withdraw. Luckier victims will run away here, but those who take this bait will simply lose even more money. Ultimately, the victims cannot get back the money invested and the scammers cut off contact with the victims, thus completing the scam.

Source: Global Anti-Scam Organization

The rise of the pig slaughter scam

According to the FBI, pig slaughter fraud resulted in more than $429 million in losses in 2021. More than 75% of the victims lost at least half of their net worth and about a third were indebted to pig slaughter fraud.

The Global Anti-Scam Organization reported that 67% of hog slaughter scam victims are women between the ages of 25 and 40, who lost an average of $121,926. Similar studies conducted in Australia and China reflected this bias, with approximately 69% of reported victims being women.

Perhaps surprisingly, 32% of pig slaughter victims have college degrees. This is grossly over-represented as only 13.1% of the US population has an advanced degree.

The Global Anti-Scam Organization also found that victims of hog slaughter schemes are typically unfamiliar with how regulated brokers work, were targeted at a difficult time in their lives, and had significant savings to invest.

How to recognize and avoid pig slaughter systems

The FBI has released four tips to avoid becoming a victim of pig slaughter and similar scams.

Check claims for investment opportunities

Conduct comprehensive due diligence on all claims to investment opportunities. Scammers who slaughter pigs often reach out to their victims for other purposes, to build trust, and only later present the fraudulent investment prospects, once they have established a relationship with the victims. Exercise extreme caution when strangers or long-lost contacts come forward to suggest investment opportunities.

Double check domain names

Many scammers who slaughter pigs create domains that mimic the websites of reputable financial institutions. Make sure you always check domain names, especially for cryptocurrency exchanges, to spot the subtle changes that characterize fraudulent websites.

Do not download suspicious software or apps

Stop investing in apps or software and rate them before you download anything. To confirm the validity of an app, pay attention to the information in the app stores, e.g. B. Developer, Vendor, and Application Description. If the developer’s name is unknown, contains misspellings, or heavily imitates a well-known brand or organization, it could be a rogue app. Most app stores include links to the developer’s website. Therefore, always verify that these links point to an authentic website before proceeding. Be careful when unknown websites ask you to download applications or software.

If an investment opportunity sounds too good, it probably is

The golden rule of investment due diligence applies here. If an investment opportunity sounds too good to be true, it probably is. Pig slaughter scams often promise guaranteed returns, which should always be taken as an important red flag.

Law enforcement actions against pig slaughter systems

On October 13, 2022, the U.S. Department of Justice unsealed an indictment against 11 residents of New York and New Jersey for allegedly defrauding victims of approximately $18 million from pig slaughter programs. The defendants were charged with, among other things, money laundering conspiracy, wire fraud conspiracy, bank fraud conspiracy, passport fraud conspiracy and aggravated identity theft for their role in these schemes. This indictment is the largest indictment against individuals who committed and defrauded victims through pig slaughter programs.

On November 21, 2022, the US Attorney for the Eastern District of Virginia announced the seizure of seven domains used in hog slaughter programs. These domains were all fake versions of the Singapore International Monetary Exchange website.

The victims lost over $10 million in this particular case of pig slaughter.

On-chain investigation of pig slaughter

Not all pig slaughter scams use cryptocurrencies. This can make it difficult to track the flow of money in the often opaque world of banking. However, for those who do, we can easily use blockchain analytics to track down stolen funds and identify scammers’ wallets.

In the aforementioned case, after accessing a fake Singapore International Monetary Exchange website, victims obtained one of seven deposit addresses on the Ethereum blockchain. After the victim transferred funds to these wallets, the scammers transferred the funds to a common intermediate deposit address.

From there, the funds were transferred to decentralized exchanges (DEXs), where ETH was exchanged for stablecoins. From there, the funds were transferred to numerous other addresses and later diverted through the conversion of cryptocurrency into fiat currency by depositing numerous OKX addresses. According to US intelligence, the scammers likely chose to use OKX to convert the stolen cryptocurrency into fiat currency since the exchange is based in the Seychelles and cannot be used in the United States. Exchanges that value operating outside of United States jurisdiction are less likely to respond to US search warrants and subpoenas, helping to provide cover for international scammers and money launderers.

In this case, scammers continued this scam from around May to August 2022, with at least five identified victims whose funds were transferred, stolen, and laundered through this series of on-chain transactions.

Pig slaughter combines manipulation tactics with complex money laundering techniques, resulting in multiple layers of fraud. Analysis of on-chain activity provides quantifiable insights into the mechanisms and extent of fraud in pig slaughter. Armed with knowledge of how they work and what to look for, potential targets can better spot such scams and avoid becoming victims.

The importance of understanding fraud in pig slaughtering

CertiK’s mission to secure the Web3 world includes spreading awareness and information about known and identified scams. By understanding common tactics used by scammers, users can better spot and avoid these scams. The activities on the chain can be analyzed and evaluated to better understand the money laundering methods used by these scammers as well.

If you suspect you are being contacted by a scammer, you can report it to the FBI through the Internet Crime Complaint Center. Users can additionally alert the community by reporting suspicious projects directly from the CertiK Security Leaderboard. Community notifications are shared in real-time via @CertiKAlert.

Pig slaughter scams are one of many methods that unscrupulous actors use to try and steal money from unsuspecting investors. For more information, see our analysis of front-running scams that are becoming more common on YouTube.

The official post for this article can be found on the CertiK Blog