The Pig Butchering Scam!

Summary

The 'Pig Butchering' scam, prevalent during the COVID-19 pandemic, lures victims into online relationships, then entices them into cryptocurrency investments through fake trading apps. Scammers, often themselves victims of human trafficking, manipulate targets to invest substantial amounts, only to vanish with the funds. The scam has evolved with the use of AI and sophisticated tactics, leading to significant financial losses and even impacting the banking system. The video also discusses the role of Tether and Tron in facilitating these scams and the challenges faced by law enforcement in tracking and stopping these illicit activities.

Takeaways

• 📨 The Pig Butchering scam initiates with seemingly ordinary messages from strangers, often on social media or dating sites, aiming to establish trust and friendship.
• 💡 Scammers lure victims into online relationships, portraying themselves as wealthy due to cryptocurrency trading, exploiting the allure of quick riches during periods of boredom, such as the COVID-19 pandemic.
• 🎯 The scam differs from the 'Nigerian Prince' scam in its methodical development of a relationship before introducing the cryptocurrency investment angle.
• 🕵️‍♂️ The detailed example of Zeke Faux's interaction with a scammer illustrates the patience and tactics used to entice victims into investing in fake cryptocurrency exchanges.
• 💔 The scam's impact is far-reaching and financially devastating, with victims ranging from individuals to institutional figures like a bank CEO, leading to significant financial losses and even bank failures.
• 🐷 The term 'Pig Butchering' reflects the scammer's method of 'fattening' the victim with false hopes before 'slaughtering' them financially.
• 🌍 The scam's operations have been traced to specific locations in Southeast Asia, where workers are often trafficked and forced to run these scams under duress.
• 🛡️ DeleteMe, the video's sponsor, offers a service to protect personal information from being exploited by scammers by removing data from data brokers.
• 📈 The scam involves fake trading apps that mimic the appearance and functionality of legitimate platforms, tricking victims into believing their investments are growing.
• 🕊️ Scammers use AI and other technologies to create convincing profiles and even fake video calls, furthering their deceit.
• 📉 The Chinese government's crackdown on crypto fraud has pushed these operations offshore, where they have adapted and expanded, targeting a broader range of victims.

Q & A

What is the 'Pig Butchering' scam?

The 'Pig Butchering' scam is a type of online fraud where victims are befriended, often through social media or dating sites, and then lured into a false sense of security before being manipulated into investing in cryptocurrencies, which ultimately leads to significant financial loss.

How did the 'Pig Butchering' scam originate and how did it evolve?

The scam originated in China and initially targeted Chinese citizens. After Beijing imposed a ban on cryptocurrency investments in 2022, the scammers shifted their focus to ethnic Chinese women living abroad and eventually targeted anyone who would respond to their messages.

What is the connection between the 'Pig Butchering' scam and cryptocurrency?

The scam heavily relies on cryptocurrency as the medium for investment, using it to create a sense of legitimacy and to facilitate the transfer of funds. The scammers often use stablecoins like Tether, which are pegged to the US dollar, to convince victims of the safety of their investments.

Why was the 'Pig Butchering' scam more successful during the COVID-19 pandemic?

The pandemic provided the perfect conditions for scammers to prey on lonely individuals who were stuck at home and looking for connections online. The travel restrictions also provided a plausible excuse for why the scammers could not meet their victims in person.

How do scammers in the 'Pig Butchering' scam manipulate their victims?

Scammers build a relationship with the victim, often over an extended period, to gain their trust. They use a combination of flattery, shared interests, and the promise of wealth through cryptocurrency investments to manipulate the victim into parting with their money.

What is the role of fake trading apps in the 'Pig Butchering' scam?

Fake trading apps are used to simulate the appearance of legitimate trading platforms. They are designed to give victims a false sense of confidence by showing fabricated trades and profits, encouraging them to invest more money.

How do scammers use AI in the 'Pig Butchering' scam?

Scammers use AI to generate profile photos or heavily photoshop images to avoid detection. They may also use AI software for video calls to impersonate the person they are scamming, and in some cases, claim their camera is broken to avoid video and only do voice calls.

What is the scale of the 'Pig Butchering' scam in terms of financial loss?

According to the script, investigators estimate that at least $10 billion has been lost to crypto romance scams like 'Pig Butchering'. There have been cases where individuals have lost millions of dollars, and even a bank CEO ended up in prison after losing $50 million of the bank's money.

How does the 'Pig Butchering' scam relate to human trafficking?

The scam is connected to human trafficking as some scammers are themselves victims, lured from various parts of Southeast Asia with promises of high-paying jobs, only to be held captive, have their passports confiscated, and be forced to run these scams.

What measures can individuals take to protect themselves from the 'Pig Butchering' scam?

Individuals should be cautious of unsolicited messages from strangers, especially if they involve investment opportunities. They should verify the legitimacy of any investment platform and be wary of anyone pressuring them to invest in cryptocurrencies.

What is the role of DeleteMe in the context of this video script?

DeleteMe is the sponsor of the video. It is a subscription service that helps individuals remove their personal information from data brokers, which can be used by online scam artists to target potential victims.

Outlines

00:00

📨 The Pig Butchering Scam: Initial Contact and Trust Building

The Pig Butchering scam initiates with seemingly ordinary messages from unrecognized individuals across various platforms, including text messages, social media, and dating sites. The unsuspecting recipients might ignore these messages, but those who respond are drawn into an online relationship with an attractive stranger who eventually reveals their wealth, attributed to cryptocurrency trading. This scam gained traction during the COVID-19 pandemic when people were more likely to entertain online interactions. Unlike the Nigerian Prince scam, Pig Butchering involves significant time and effort in cultivating a relationship before any financial aspect is introduced. The narrative includes an investigative reporter's experience with a scammer who built trust over time, only to disappear once the reporter's true identity was revealed. The scam's name is derived from a farming practice, and the scammers refer to themselves as 'dogs,' highlighting the dehumanizing nature of the operation.

05:01

🏭 The Dark Reality of Forced Labor Behind the Scam

The script delves into the grim reality behind the Pig Butchering scam, revealing a network of captive workers in Southeast Asia, lured by false job promises and held against their will. These individuals, who had their passports confiscated, are forced to operate the scams, with local law enforcement either complicit or powerless to help. The video also introduces a sponsor, DeleteMe, a service that helps individuals remove their personal information from data brokers, which is often exploited by scammers. The Pig Butchering scam follows a pattern of befriending victims and instructing them to buy crypto stablecoins before transferring funds to fraudulent trading apps. These apps are designed to mimic legitimate platforms, complete with features like two-factor authentication, to instill a false sense of security in the victims.

10:05

💼 The Financial Impact and Emotional Manipulation Tactics

The narrative explains how victims of the Pig Butchering scam can initially withdraw small amounts of money to build trust, but once they've invested larger sums, they find themselves unable to withdraw funds. The scammers manipulate the victims into wiring additional money for fabricated reasons, like taxes, further exploiting them financially. The scam's impact is far-reaching, with victims often too embarrassed to report the crime. The scam initially targeted Chinese citizens but later shifted focus to ethnic Chinese living abroad and eventually anyone responsive to their messages. The Chinese government's crackdown on crypto frauds and the subsequent offshore movement of criminal gangs are discussed, along with the pandemic's role in facilitating the scam's growth.

15:08

🌐 Cryptocurrency's Role in Facilitating and Concealing Illicit Funds

The script discusses the use of cryptocurrencies, particularly Tether and the Tron blockchain, by scammers for their price stability and low transaction fees. It details how the scammers leverage these technologies to extract payments from victims and the families of trafficked workers. The difficulty of tracing cryptocurrency transactions due to their quasi-anonymous nature is highlighted, along with the challenges faced by law enforcement in investigating such crimes. The narrative also includes a case of a Kansas bank CEO who lost millions to the scam, leading to the bank's collapse and significant financial repercussions.

20:13

📚 Scammers' Psychological Manipulation and the Impact on Victims

This section of the script describes the psychological tactics used by scammers, as outlined in leaked handbooks, to manipulate their victims. Scammers are instructed to create attractive, educated, and seemingly wealthy profiles, using strategies to appeal to the victims' dreams and goals. The handbook also suggests tricks to create a sense of wealth and success, and to gradually introduce the idea of cryptocurrency investment as a game. The darker side of these scams, involving blackmail using intimate photos, is also mentioned, with advice on how to handle such situations.

25:17

🔎 Tracking Illicit Cryptocurrency Flows and the Challenge for Regulators

The script presents a study by researchers from the University of Texas at Austin, which tracked the flow of illicit funds through cryptocurrency exchanges. The study identified patterns in the use of certain exchanges and the role of stablecoins like Tether in facilitating money laundering. It highlights the shift in victim demographics following China's ban on cryptocurrency and the subsequent increase in US-based victims. The researchers argue that the existing financial system is ill-equipped to deal with the anonymous nature of cryptocurrency transactions, and they suggest that more needs to be done by regulators and law enforcement to prevent the movement of illicit funds.

🛑 The Urgency for Regulatory Action Against Cryptocurrency-Enabled Crime

The final paragraph emphasizes the urgency for regulatory action to address the growing issue of cryptocurrency-enabled crime. It discusses the findings of the University of Texas study, which suggest that certain crypto exchanges are complicit in facilitating illegal activities. The narrative calls for better monitoring and protection of customers by these exchanges, as well as a coordinated international effort to track and disrupt criminal networks using cryptocurrencies. The paragraph concludes with a call to action for viewers to learn more about the issue and to support the video's sponsor, DeleteMe.

Keywords

💡Pig Butchering scam

The 'Pig Butchering scam' is a type of advanced fee fraud where scammers establish a relationship with the victim, often under false pretenses of romance or friendship, and then lure them into investing in cryptocurrencies. This scam is central to the video's theme, illustrating the manipulative tactics used to defraud individuals. In the script, it is mentioned that the scam flourished during the COVID-19 pandemic when people were more likely to be at home and susceptible to such approaches.

💡Cryptocurrency

Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates independently of a central bank. In the context of the video, cryptocurrencies are the medium through which the 'Pig Butchering scam' operates, with victims being convinced to invest in them, often through fake trading apps or platforms. The script highlights how scammers use the allure of cryptocurrency trading to deceive victims into parting with their money.

💡Stablecoin

A stablecoin is a type of cryptocurrency that is pegged to a stable asset, like the US dollar, to minimize price volatility. In the video script, the scammer instructs the victim to fund an account using Tether, a stablecoin, under the guise of safety and convenience. This keyword is crucial as it relates to how victims are introduced to the cryptocurrency aspect of the scam.

💡Tether (USDT)

Tether, often abbreviated as USDT, is a stablecoin that is pegged to the US dollar and is mentioned in the script as the currency the victim is initially asked to use to fund their account. It is highlighted as a preferred method for scammers due to its stability and the perception of safety, which helps in gaining the victim's trust.

💡Crypto romance scams

Crypto romance scams are a subset of online scams where fraudsters use romantic relationships as a cover to trick victims into investing in cryptocurrencies. The script emphasizes the emotional manipulation involved in these scams, with victims being lured into a false sense of intimacy before being exploited financially.

💡Yuman Traffique King

Human trafficking is a grave crime where individuals are exploited for various forms of forced labor. In the video, it is linked to the 'Pig Butchering scam', with victims of human trafficking potentially being forced to operate these scams. The script describes how workers are lured with false job promises and then held captive to defraud others.

💡Blockchain

A blockchain is a decentralized, public ledger that records transactions across multiple computers in a way that is secure from alteration. The script mentions blockchain analytics firm Chainalysis, which was involved in tracking the flow of illicit funds from the scams, demonstrating how blockchain technology can be used both for criminal activities and for tracking them.

💡Two-Factor Authentication (2FA)

Two-Factor Authentication is a security process that requires two different forms of verification to access an account. In the context of the video, scammers use the appearance of 2FA as a way to lend legitimacy to their fraudulent trading apps, tricking victims into believing they are interacting with a secure platform.

💡DeFi (Decentralized Finance)

DeFi refers to financial services that are operated on a decentralized blockchain rather than being provided by traditional centralized institutions. The script touches on how scammers use the guise of DeFi to create an illusion of legitimacy for their fraudulent activities, enticing victims with the promise of high returns.

💡KYC (Know Your Customer)

KYC is a process required by financial institutions to verify the identity of their clients to prevent fraud, money laundering, and other illegal activities. The script points out that some crypto exchanges have loose KYC procedures, which allows for illicit activities to go undetected, facilitating the operations of the scammers.

💡Anti-Money Laundering (AML)

AML refers to the legal procedures and regulations designed to prevent illegal money transactions. The video script discusses how traditional financial systems have AML frameworks in place to block criminal activity, contrasting this with the challenges posed by the anonymity of cryptocurrency transactions in facilitating money laundering.

Highlights

The Pig Butchering scam starts with unsolicited messages from strangers, often on social media or dating sites, leading to a seemingly genuine relationship.

Victims are lured into online friendships or romances with individuals who claim wealth from cryptocurrency trading.

Pig Butchering differs from the Nigerian Prince scam in its focus on relationship building rather than immediate financial requests.

The scam flourished during the COVID-19 pandemic, capitalizing on people's isolation and interest in cryptocurrency success stories.

Scammers use sophisticated methods, including AI-generated profile photos and fake help desks, to mimic legitimate trading platforms.

Victims are encouraged to invest in cryptocurrencies, starting with small amounts to build trust before larger sums are requested.

Losses from Pig Butchering scams are substantial, with documented cases of individuals losing millions of dollars.

Scammers often target individuals with terminal illnesses or in vulnerable positions, exploiting their emotional states for financial gain.

Pig Butchering scams have led to significant financial losses for institutions, including the collapse of a bank due to the CEO's involvement.

Crypto romance scams like Pig Butchering have resulted in an estimated loss of at least $10 billion dollars.

Scammers are often victims of human trafficking themselves, working in forced labor conditions in foreign countries.

The scam's infrastructure has adapted to law enforcement efforts, moving operations offshore and using digital currencies to avoid detection.

Cryptocurrency's pseudo-anonymity and the lack of stringent KYC procedures on certain exchanges facilitate the laundering of illicit funds.

The Pig Butchering scam has evolved to target a broader demographic as law enforcement and regulatory actions have increased in China.

Scammers use psychological manipulation to exploit the dreams and aspirations of their victims, as outlined in leaked scammer handbooks.

Research by John Griffin and Kevin Mei from The University of Texas at Austin has identified patterns in cryptocurrency money flows used by scammers.

The study suggests that cryptocurrency exchanges, particularly those with lax KYC procedures, may be complicit in facilitating scams.

The research indicates that tracking cryptocurrency transactions is feasible and could be a tool for law enforcement to combat scams.

Transcripts

The Pig Butchering scam typically begins with  a fairly ordinary message that arrives from  

a person you don’t recognize, it might be a  text message that looks like a wrong number,  

or it might be a message that arrives on  LinkedIn, Instagram or even an online dating  

site. Sometimes it is even a scam comment under  a YouTube video that you have been watching. 

A lot of people receive these messages and  ignore them, either suspecting a scam or  

they just don’t feel like responding.  Those who do reply find the (usually  

attractive) stranger wants to befriend them. Eventually the victim is lured into an online  

friendship or romance and learns that  the person messaging them is quite  

wealthy – later it comes out that it is due  to their expertise trading cryptocurrencies. 

The scam flourished during the covid years at a  time when people were stuck at home bored, and it  

didn’t seem so crazy to run into someone who had  made a fortune trading crypto - after all the news  

was filled with stories like that at the time. Pig butchering – as a scam - is quite different  

to the Nigerian Prince scam, which  everyone has heard of at this point,  

as there is no obvious upfront pitch and  lot of time spent developing a relationship. 

In ‘Number Go Up’ by Zeke Faux – he described  stringing along one of these scammers as part  

of the research for his book on crypto fraud. The 32-year-old divorcee who started texting him,  

chatted for a while and befriended him  before she began to send him charts of  

bitcoin returns demonstrating her trading  skills. When he expressed curiosity, she told  

him that he wasn’t ready to trade like her yet and  recommended that he read some books on bitcoin and  

investing first. She chatted away for days never  asking him to send her any money. Eventually,  

after he mentioned that he would love to someday  buy an expensive car – she told him that if  

she taught him how to trade the car would be  affordable. She then sent him a link to a crypto  

exchange suggesting that he open an account  and she would tell him when to buy and sell  

so that he could multiply his savings quickly. Once he opened an account, he had to fund it using  

a stablecoin called tether which she explained  was safe as it traded 1:1 with the US dollar.  

He started with $100 dollars – which converted  into 81 Tether – because – ya know – crypto  

transaction costs… She explained that he  really needed to fund the account with at  

least $500 dollars to get going – she even called  him up to help him fill out the online forms. 

Zeke, unfortunately never got to multiply  his savings and buy the car of his dreams,  

as when he explained that he was an investigative  reporter, she hung up, her online profile  

disappeared, and he never heard from her again. A few of my viewers possibly think that Zeke was  

wise to get his story and escape after only losing  a hundred dollars, but who knows, maybe his FUD  

prevented him from anteing up the $500 and getting  the Cybertruck of his dreams. We will never know… 

According to a BBC documentary on the topic, the  scam is known as Pig Butchering after the practice  

of farmers fattening hogs before slaughter.  According to the BBC, the scammers call  

themselves dogs. The BBC then seem to have given  them dog masks to wear while being interviewed.  

In my opinion they missed the chance of asking  if there is anything else that people call them,  

and getting them to wear much funnier masks, but  maybe that’s why the BBC would never hire me… 

Eh Patrick – the people in HR  want to chat with you about the  

origami masks that you have been making… Anyhow, the BBC documentary showed how a  

Boston Lawyer with terminal cancer was scammed  out of two and a half million dollars. Even worse,  

a Kansas Bank CEO recently ended up in prison  after he lost 50 million dollars of the bank’s  

money to a pig butchering scam. The losses  caused the bank to fail last summer. The  

size of the losses in these scams is huge.  An investigator at a crypto-tracking firm  

told Zeke that at least $10 billion dollars has  been lost to crypto romance scams like these. 

The most shocking part of Zekes story, which he  discussed with me on this channel a few months  

ago is that he later learned that whoever was  posing as Vicky was most likely themselves a  

victim of Yuman Traffique King. Later as part  of his research, Zeke travelled to a small  

casino town in southeastern Cambodia where these  messages can be traced to and visited a compound  

of heavily guarded buildings, where one of the  guards told his guide that the buildings were  

rented to Chinese companies and the workers  inside couldn’t leave. He was told it was  

useless to report forced labor to the local law  enforcement who had been paid off as rather than  

aiding the victims, the local law enforcement  would detain them for immigration violations,  

possibly returning them to their captors. The workers trapped inside these buildings were  

allegedly young people who had been lured from  all over Southeast Asia with the promise of highly  

paid jobs. They had their passports confiscated  and were held captive, forced to run these scams. 

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The pig butchering scam generally follows a  fixed pattern of befriending the victim before  

instructing them to buy crypto stablecoins on  well-known crypto exchanges before then getting  

them to transfer the funds to fake trading apps  that look and sound legitimate to crypto newbies. 

The fake trading apps are set up to have the  look, the detail and the functionality of a real  

trading app and some scammers even use legitimate  software that allows anyone to build a trading  

platform - as some of these software companies  license their software to foreign exchange brokers  

who provide it as a front end to their clients.  According to ForexFraud.com scammers use clones  

of well-known trading apps which are modified  to simulate transactions to make it look like  

real trades are happening and money is being  made – in the real world, no actual trades are  

happening. Seeing this gives the victims a false  sense of confidence and helps to encourage them to  

add more money to their accounts or to even get  their friends and family to open accounts too. 

This scam can be more sophisticated than you  might expect. Some of the scam brokers even  

have fake help desks to field phone calls  and they encourage the use of features like  

two Factor authentication, giving victims  the feeling that they are dealing with a  

legitimate broker. Some of these trading apps  are even downloaded from the big app stores,  

and the scam victims check the reviews, see that  the app is highly rated, and everything seems OK. 

The scammers are known to use AI generated profile  photos, or heavily photoshopped images so that a  

google reverse image search won’t give them away.  They occasionally even use AI software so that  

they can do video calls with the scam victims.  In other cases they claim that the selfie camera  

on their phone is damaged so that they can only  do voice calls. The Boston lawyer with terminal  

cancer who was ripped off was being sent photos  lifted from a Korean models Instagram account, and  

had multiple phone calls with the scammer. [Clip] Before ripping off their victims, the scammers  

slowly build up a profile of the persons  finances through the online relationship,  

asking questions about their income, the type of  car they own, their lifestyle and the assets they  

might own, like a home. They also encourage  roping in friends and family members by  

promoting flash coin sales and special deals. When the accounts are small, the scam victims  

can often withdraw some of their money. This  tricks them into trusting the online platform,  

but once they have deposited a lot of money, they  find themselves no longer able to withdraw. Often  

the way it works is that they are told that  they need to wire in additional money to pay  

a tax before withdrawing their funds. This can  squeeze the last bit of money out of them. Their  

online romantic guide tells them that this is  totally standard, and if they can’t come up  

with the money will encourage them to borrow it  from friends and family to pay the tax. Shortly  

afterwards the brokerage firm disappears, the  beautiful stranger disappears, and the victim  

realizes that their money is gone. Often victims  are so embarrassed that they don’t even report the  

crime to law enforcement because of the shame. According to an FT article, Pig Butchering  

scammers initially preyed on Chinese  citizens, but later focused on ethnic  

Chinese women living abroad after Beijing  imposed a domestic ban on cryptocurrency  

investments in early 2022. At this point they  target anyone who will respond to their messages. 

While it might seem funny to string the  scammers along and waste their time,  

these claptive workers are often between  if they don’t bring in enough money. 

The Chinese government began its  crack down on crypto frauds in 2017,  

eventually outlawing cryptocurrencies  altogether. When this scam first appeared,  

the Chinese police arrested gang members and  warned citizens about how to avoid crypto fraud.  

The severity of the crackdown in China forced  the gangs offshore to south-east Asia, where they  

began targeting victims outside of mainland China. The pandemic provided the perfect opportunity for  

scammers to build relationships with lonely men  and women who were stuck at home - and the travel  

restrictions that had been put in place around  the world provided the perfect excuse for why the  

con artist could never meet up in person. News  reports of booming crypto prices and unlikely  

millionaires made the whole thing seem much  more plausible back then than it does today. 

When the scammers began to flee China in late 2017  and early 2018, many moved to a town in western  

Cambodia, nicknamed the “Macau of south-east  Asia”, where a fast growing casino industry  

run by Chinese entrepreneurs already existed. The casinos were booming at the time and attracted  

criminals, loan sharks and prostitutes.  In 2018, the provincial governor warned  

that Chinese investment had “created opportunities  for the Chinese mafia” — including kidnapping,  

resulting in “insecurity” for the region. Towards the end of 2019, Cambodia’s prime minister  

effectively banned online gambling. The pandemic  a few months later brought travel restrictions,  

closing the remaining casinos and bringing a  halt to the local construction boom. A lot of  

the Chinese casino workers and construction  workers returned home, and the criminal  

gangs were forced to evolve. They turned the  casino hotels and the newly abandoned office  

and residential buildings into call centers for  their new profit center - the pig butchering scam. 

According to UN estimates, the Pig Butchering scam  quickly grew to make up half of Cambodian GDP,  

which meant there was a lot of  money being made which could be  

used to bribe local law enforcement. The scale of Yuman Traffique King that  

occurred to staff these scam centers become such  a big issue that Chinese authorities had to issue  

travel warnings to Chinese citizens, warning  them to be wary about accepting well paid jobs  

in Cambodia due to the risk of being enslaved. In 2021, a joint Cambodian/Chinese police raid  

busted a 200-person scamming complex in Phnom  Penh where most of the imprisoned workers  

turned out to be from China’s Yunnan province. An FT article from earlier this year describes  

how analysis by the blockchain analytics  firm Chainalysis and the anti-slavery  

group “International Justice Mission”  shows that a single compound in Myanmar  

scammed over $100 million dollars from Pig  Butchering victims in less than two years. 

The investigators tracked digital coins issued  by Tether being moved over the Tron blockchain  

from Pig Butchering Victims to two digital  wallets owned by a Chinese company. They  

showed that Tether tokens and the Tron  blockchain had also been used to extract  

payments from the families of traffiqued workers  who were paying grand sums for their release. 

Chainalysis told the FT that they are seeing  lots of scammers leverage Tether and Tron as  

the price stability of Tether is attractive,  combined with the low transaction fees for Tron. 

A spokesman for The International Justice  Mission told the journalist that “Everyone  

has known for a long time that these scams were  blockchain-based, but this was the first time  

they had been able to tie the scamming to  a specific location and a known compound” 

In the book “Number Go Up,” a Taiwanese  police officer told Zeke Faux that he  

had been investigating Yuman Traffique King for  quite some time and that crypto was now making his  

work a lot more difficult. In the old days when  criminals used traditional methods to move money,  

banks would turn over the criminal’s information  to authorities in order to remain in compliance  

with the law. The police officer explained to  Zeke that Tether doesn’t collect any information  

on the holders of its coins, making these  crimes extremely difficult to investigate. 

In possibly the highest profile example  of pig butchering, a Kansas bank called  

Heartland Tri-State Bank failed this  time last year after its CEO allegedly  

used bank funds to buy cryptocurrency  after being lured in with this scam. 

According to Bloomberg, the bank almost completely  tapped out its sources of cash — drawing $24  

million dollars from lines of credit with  a correspondent bank to fund improper wire  

transfers. According to a regulatory review, the  bank drew $21 million dollars from the Federal  

Home Loan Bank System, shortly before collapsing. The Justice Department charged Heartland’s former  

CEO, Shan Hanes in February this year, with  embezzling $47.1 million dollars from the company. 

The sudden collapse of Heartland Tri-State  Bank is reported to have shocked the Elkhart  

community in Kansas that Heartland served,  adding to a string of regional-bank failures  

last summer that culminated in a hit  to the FDIC insurance fund that is  

estimated to have cost $54 million dollars. I’ll put a link in the description to a BBC  

documentary from last year that can be found on  YouTube that documents some of the terrible abuse  

suffered from the trafiqued individuals forced  to work in these scam call centers. Their stories  

are not for the faint of heart and describing  them here would likely upset some viewers and  

possibly get me demoneytissed on You Tube. Leaked Chinese-language scammer handbooks  

which can be found online underscore how  the scammers toy with human psychology to  

take advantage of their victims, which the  guidebook refers to as “customers”. There is  

however no mention of the customer ‘always  being right’ in the guidebook. I checked… 

The guidebook says that your profile  should have a naughty but cute nickname,  

nothing crude. Your profile should be young  enough to be attractive, but old enough to  

avoid being seen as childish. You should seem  educated; wealthy and you shouldn’t appear to have  

a regular job. Male scammers can claim to have  autism or an old psychological trauma from their  

youth and the female customer's natural maternal  love will instinctively come out when they hear  

this and they won’t pressure you. Female scammers  don’t need any of that backstory… They just have  

to use a somewhat attractive profile photo… The manual teaches the scammers to arouse  

the customer’s inner dreams, goals and  to bring out a fighting state of mind.  

You can tell stories about how you teach  a friend or relative how to make money,  

and that friend then cooks you meals in return. It suggests tricks like sending the customer two  

pictures of luxury bags or watches  asking them to help you choose one,  

hinting that you have recently made a lot of  money and want to buy a gift for a family member. 

It says that you should initially ease  “customers” into making crypto investments  

by playfully bringing it up as a game you can  play together. “Tell the customer you’re bored,  

that you want to play a game with them  that can make them some extra money.” 

There are uglier versions of these romance scams  too, where criminals using online dating sites  

request intimate photos from their victims  and then use them for blackmail. Of course,  

the demands for money in a situation like that  will never end. This version of the scam often  

targets teenage boys and has led to some  really terrible outcomes. In a situation  

like this you just have to let them release  the photos and then tell your friends and  

family that they are deepfakes created using  AI and just move on… Possibly the most useful  

thing we may get from AI is a plausible excuse… A paper from John Griffin and Kevin Mei from  

The University of Texas at Austin published  a few months ago tracked crypto money flows  

in order to uncover how these scammers operate. The authors used data from victim reports to find  

the cryptocurrency addresses where victims were  directed to send their funds by the scammers.  

They started with 4728 crypto addresses and found  that most of the addresses were used ten or more  

times by the scammers. Twenty eight percent of the  addresses were used more than one hundred times,  

so they are not that worried about  these things being shut down quickly. 

The authors tracked $15.2 billion dollars being  moved from five exchanges, including Coinbase,  

Crypto.com and Binance - exchanges typically used  by victims in Western countries. The study said  

that once the scammers collected funds, they most  often converted the various tokens into Tether,  

a popular stablecoin known as USDT through  Tokenlon. Then, after circulating it through  

various hops in the network, the crypto  finally exits the system through centralized  

exchange deposit addresses. Transactions  in amounts above $100,000 dollars and in  

particular $1 million dollars commonly went to  deposit addresses on Binance, Huobi, and OKX. 

The researchers broke the transactions down into  two groups, small transfers and large transfers,  

figuring that the small transfers back to  exchanges were most likely inducement payments,  

used to build the trust of the victims and  because scammers were unlikely to return large  

sums of stolen funds to their victims,  they considered deposit addresses that  

receive more than $100,000 as more likely  to be the scammers own deposit addresses. 

These suspiciously large transactions  were rarely sent to Western exchanges,  

instead going to Binance, Huobi, OKX, Kucoin,  Bitkub, and MXC. They say that the common  

feature of these exchanges is that they have  loose KYC procedures and are perceived to be  

outside of the reach of US law enforcement. The study discovered by tracing the funds that  

after the Chinese government banned cryptocurrency  in late 2021, there was a dramatic decrease in  

Chinese victims and a shift to US based victims.  Overall, in the set of addresses touched by the  

criminals, they found that 84% of the volume  or $1.2 trillion dollars went through Tether. 

The professors point out that it would be  impossible to move that much illicit money  

through the traditional financial system  as the criminals would have to deal with  

banks who follow anti money laundering  and know-your-customer procedures. You  

couldn’t move that much money using cash either. Money flows – they point out are the lifeblood of  

organized crime, financing both current and future  criminal activity. If these flows move unimpeded,  

then criminal networks can be expected to expand  over time. This is why the international financial  

system has a framework in place to block the  financing of international criminal activity.

The paper argues that with the emergence  of cryptocurrencies which were specifically  

designed to create an anonymous alternative  financial system, criminal networks now have  

new ways of avoiding the detection and seizure  of criminal proceeds. The professors highlight  

that crypto is rarely used as a medium of  exchange to purchase goods and services, and  

thus typically needs to be converted into usable  money. The entry and exit points into the crypto  

ecosystem are – according to their research -  typically crypto exchanges, which also purport to  

conform to international laws designed to mitigate  illicit financial flows. They point out that while  

crypto transactions are quasi-anonymous, they are  still recorded on publicly accessible blockchains  

and with substantial effort, the movement of  funds and their exit points can be tracked.

The YouTube channel Coffeezilla has repeatedly  shown this to be true by successfully  

tracking cryptocurrency transfers from the  stupidest types of scammers – Influencers…  

So far – unfortunately - regulators and law  enforcement appear to be either unwilling  

or unable to do anything about this type of crime  other than recording it and discussing if various  

cryptocurrencies should be considered commodities  or securities, a somewhat pointless distinction.

In Number Go Up, a book I will link to in the  video description, Zeke Faux describes visiting  

a scam compound in Cambodia alleged to house six  thousand captive workers. He describes seeing  

people walking out of a money exchange booth that  displayed the Tether logo carrying a lunchbox-size  

brick of $100 bills wrapped up with rubber bands. The University of Texas professors put forth a  

number of practical implications that can be  drawn from their study. They firstly highlight  

which crypto exchanges are operating as the off  ramp for scammers. They show how useful Tether  

is to these criminals due to its stability and  opacity, and they show how decentralized exchanges  

help block the tracking of illegal fund flows.  The professors argue that the (often European  

and American) crypto hedge funds that provide  liquidity on these platforms are profiting by  

facilitating money laundering. They point out  that the consistent patterns that their study  

uncovered point to a large, coordinated network,  or several networks which share similar services,  

meaning that these scams should not  necessarily be treated as individual crimes,  

which is at present the norm for law enforcement. They finally argue that western crypto exchanges  

who provide entry points for victims into the  scam network are not adequately monitoring and  

protecting their customers, which they are capable  of doing in the way that credit card companies are  

able to flag suspicious credit card transactions. Their findings suggest that criminal networks are  

moving substantial funds cheaply and without  much fear of detection and that the methods  

used for this study could be applied by law  enforcement to track these criminal networks. 

If you found today’s video interesting, you  should watch my interview with Zeke Faux on  

his book Number Go Up next. Don’t forget  to check out our sponsor DeleteMe using  

the link in the description. Have a great  day and see you in the next video, bye.