Through blockchain addresses used by ‘‘pig butchering’’ victims, researchers from the McCombs School of Business, University of Texas at Austin, trace crypto flows and uncover methods commonly used by scammers to obfuscate their activities, including multiple transactions, swapping between cryptocurrencies through DeFi smart contracts, and bridging across blockchains.
The perpetrators interact freely with major crypto exchanges, sending over 104,000 small potential inducement payments to build trust with victims. Funds exit the crypto network in large quantities, mostly in Tether, through less transparent but large exchanges — Binance, Huobi, and OKX.
These criminal enterprises pay approximately 87 basis points in transaction fees and appear to have recently moved at least $75.3 billion into suspicious exchange deposit accounts, including $15.2 billion from exchanges commonly used by US investors.
“Crypto friendship or romance scams have proliferated. Random social media or text messages attempting to develop an online relationship are now commonplace. In a subset of cases, the friendly relationships slowly morph into full-blown scams known as “pig butchering” or sha zhu pan, which, in the extreme, bleed lonely, sick, and distressed victims, often with little exposure to investments and crypto, into the loss of their life savings.
“Though varied in nature, the origin of these scams is often even darker, as the manpower powering the communications is often enslaved in compounds thought to hold 220,000 victims in Southeast Asia,” the authors wrote. “Our findings highlight how the ‘reputable’ crypto industry provides the common gateways and exit points for massive amounts of criminal capital flows. We hope these findings will help shed light on and ultimately stop these heinous crimes.”