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Pig-butchering scammers have likely stolen more than $75 billion from victims around the world, far more than previously estimated, according to a new study.<\/p>\n
John Griffin, a finance professor at the\u00a0University of Texas<\/a>\u00a0at Austin, and graduate student Kevin Mei gathered crypto addresses from more than 4,000 victims of the fraud, which has exploded in popularity since the pandemic. With blockchain tracing tools, they tracked the flow of funds from victims to scammers, who are largely based in Southeast Asia.<\/p>\n Over four years, from January 2020 to February 2024, the criminal networks moved more than $75 billion to crypto exchanges, said Griffin, who has written about fraud in financial markets. Some of the total could represent proceeds from other criminal activities, he said.<\/p>\n \u201cThese are large criminal organized networks, and they\u2019re operating largely unscathed,\u201d Griffin said in an interview.<\/p>\n Pig butchering \u2014 a scam named after the practice of farmers fattening hogs before slaughter \u2014 often starts with what appears to be a wrong-number text message. People who respond are lured into crypto investments. But the investments are fake, and once victims send enough funds, the scammers disappear. As far-fetched as it sounds, victims routinely lose hundreds of thousands or even millions of dollars. One Kansas banker was charged this month with embezzling $47.1 million from his bank as part of a\u00a0pig-butchering scam<\/a>.<\/p>\n The people sending the messages are often themselves victims of human trafficking from across Southeast Asia. They\u2019re lured to compounds in countries including Cambodia and Myanmar with offers of high-paying jobs, then trapped, forced to scam, and sometimes beaten and tortured. The\u00a0United Nations<\/a>\u00a0has estimated more than 200,000 people are being held in scam compounds.<\/p>\n The study<\/a>, \u201cHow Do Crypto Flows Finance Slavery? The Economics of Pig Butchering,\u201d was released on Thursday. Griffin and Mei found that $15 billion had come from five exchanges, including Coinbase<\/a>, typically used by victims in Western countries. The study said that once the scammers collected funds, they most often converted them into Tether, a popular stablecoin. Of the addresses touched by the criminals, 84% of the transaction volume was in Tether.<\/p>\n \u201cIn the old days, it would be extremely difficult to move that much cash through the financial system,\u201d Griffin said. \u201cYou\u2019d have to go through banks and follow \u2018know-your-customer\u2019 procedures. Or you\u2019d have to put cash in bags.\u201d<\/p>\n Paolo Ardoino, the chief executive officer of Tether, called the report false and misleading. \u201cWith Tether, every action is online, every action is traceable, every asset can be seized and every criminal can be caught,\u201d Ardoino said in a statement. \u201cWe work with law enforcement to do exactly that.\u201d<\/p>\n Tether has cooperated with authorities in some cases to\u00a0freeze<\/a>\u00a0accounts tied to fraud. But often by the time the crime is reported, the scammers have already cashed out.<\/p>\n \u201cOur paper shows they\u2019re the currency of choice for criminal networks,\u201d Griffin said.<\/p>\n Chainalysis Inc.<\/a>, a blockchain analysis firm, also said the study\u2019s totals might be inflated. Just because a blockchain address receives some money from a pig-butchering scam doesn\u2019t mean all the money received by that address comes from fraud. \u201cQuantifying funds earned through pig-butchering scams is challenging given limited reporting,\u201d said Maddie Kennedy, a spokesperson for Chainalysis. Tether is a one of the company\u2019s customers.<\/p>\n Many of the fraud victims\u2019 blockchain addresses were collected by Chainbrium, a Norwegian crypto investigations firm. Chainbrium also conducted its own analysis of the data and found that a large proportion of the funds flowed through a purportedly decentralized crypto exchange called Tokenlon. Scammers use the exchange to obscure the source of the funds, according to Chainbrium. Tokenlon didn\u2019t respond to a request for comment.<\/p>\n \u201cPeople in the US, their money is going straight to Southeast Asia, into this underground economy,\u201d said Jan Santiago, a consultant to Chainbrium.<\/p>\n Eventually, the criminals would send the scam proceeds to centralized crypto exchanges to cash out for traditional money. Griffin said\u00a0Binance<\/a>\u00a0was the most popular exchange, even after the company and its founder,\u00a0Changpeng Zhao, pleaded\u00a0guilty<\/a>\u00a0in November to criminal anti-money-laundering and sanctions charges and agreed to pay $4.3 billion to resolve a long-running investigation by prosecutors and regulators.<\/p>\n \u201cBinance is the place where they can move large amounts of money out of the system,\u201d Griffin said.<\/p>\n Like Tether, Binance has worked with law enforcement in some cases to freeze accounts tied to fraud and return money to victims. A spokesman for the company said it recently worked with authorities to seize $112 million in a pig-butchering case.<\/p>\n \u201cBinance continues to work closely with law enforcement and regulators to raise more awareness of scams, including pig butchering cases,\u201d the spokesman, Simon Matthews, said.<\/p>\n<\/div>\nSubscribe to the Eye on AI newsletter to stay abreast of how AI is shaping the future of business. Sign up<\/a> for free.<\/div>\n