Chainalysis says pig slaughter is becoming a national security threat

Table of Contents

The multibillion-dollar scam known as “pig butchering,” once considered a consumer fraud issue, has crossed new thresholds and raised national security concerns.

Andrew Fierman, director of national security intelligence at Chainalysis, and Erin West, a former prosecutor and founder of the multidisciplinary anti-fraud nonprofit Operation Shamrock, discussed on a podcast how pig slaughter poses a threat to national security.

“So if someone is touching money in any way, you are part of it. So you have to be prepared to understand the threat and the gravity of what’s going on at a national security level,” West said, emphasizing the importance of education and awareness in combating crypto fraud.

Pig butchering scams are long-term fraud strategies in which criminals attempt to establish trust with victims, often through romance or friendship, before luring them to fake crypto investment platforms and draining their funds.

Expanding scale of pig butchering fraud

In the podcast, the pair spoke about how fraud rings across Southeast Asia operate dormitory-style scam facilities where trafficked workers come into contact with unsuspecting victims, cultivate trust through romance, and coerce them into making fake crypto investments in order to drain their funds.

In 2023, the U.S. Department of Justice (DOJ) seized approximately $112 million in virtual currency related to the pig slaughter scam. Chainalysis said in a February report that in 2024, pig butchering scams alone will increase by almost 40% year-on-year, and overall cryptocurrency fraud revenue will exceed $9.9 billion.

Additionally, an underreported aspect of pig slaughter is that victims are often beaten twice. The pair said on the podcast that after the initial scam, victims receive follow-up communications from fake collection companies claiming to help them recover their money.

“Once something like this happens, you’re more likely to be put on a list (…) and get slammed again,” West said.

Fiermann and West said these scams have matured into an international crime model, merging human trafficking, money laundering and cryptocurrency rail, making them much more complex than everyday scams.

However, Fiermann suggested that blockchain transparency offers regulators, exchanges, and virtual asset service providers (VASPs) an opportunity to deter fraudulent activity.

“One of the benefits of blockchain, at least as a mechanism, is that there is an opportunity for potential disruption if blockchain is properly enabled,” he said. “And the transparency of blockchain provides an opportunity for potential disruption at the point of cash-out.”

How are authorities intervening?

As the effects of fraud become more widespread, it is natural for governments to intervene. On November 12, the Department of Justice announced the creation of a Fraud Center Strike Force to target China-linked transnational criminal organizations behind crypto investment fraud in Southeast Asia.

At the same time, local law enforcement agencies have also implemented freezes and sanctions to address the issue. On August 27, law enforcement agencies in the Asia Pacific region (APAC) worked with Chainalysis, OKX, Tether, and Binance to freeze $47 million in pig slaughter funds.

The strategy is not so simple, but it is clear. It aims to disrupt fraudsters’ on- and off-ramp points, sanction intermediaries, and build public-private partnerships.

“My argument against transnational organized crime has always been to use every tool in your arsenal: sanctions, prosecutions, diplomatic pressure,” West said.

Related: Scammers pose as Australian police to steal cryptocurrencies, authorities warn

Red flags to watch out for

As with many scams, there is a way to spot a pig butchering scam. Scams often involve emotional manipulation, and someone who expresses strong feelings towards you too quickly through online channels, especially without meeting you, may be a scam.

Suspicion grows even more when the person you’re communicating with refuses to share personal information or professional credentials.

One of the main signs that it’s a pig butchering scam is if the person starts asking for money, even if they claim it’s for an emergency.

This also takes the form of risk-free investments and easy money, often showing fake screenshots showing huge profits to convince victims to invest.