The scam name ‘pig-butchering’ is derived from the practice of farmers fattening the pigs before they are slaughtered.
In this scam, individuals are lured in by a text message from an unknown number. People who respond to the text message become victim of the alleged crypto investment. However, the crypto investments are fake and once the victim has been drained of enough funds, the scammers disappear. Victims lose hundreds, thousands, or even millions of dollars.
The Study
A study published in the journal Elsevier found that $15 billion had been transferred from five exchanges, including Coinbase, which is often used by victims in Western countries to buy, sell, and store cryptocurrency. The stolen funds were mostly converted into Tether, a popular stablecoin, making 84% of the transaction volume.
Investigators from Tether disputed the study, calling it false and misleading, but still froze accounts connected to the fraud. However, the scammers had already cashed out by then.
Chainbrium, a Norwegian crypto investigations firm, collected blockchain addresses of the fraud victims. A blockchain address is a public identifier used to send and receive digital currencies. Blockchain itself is a shared digital ledger of transactions.
Chainbrium found that much of the stolen funds passed through a decentralized exchange called Tokenlon. These exchanges allow users to trade cryptocurrencies without a central authority, funnelling money into an underground economy.
The next step for scammers is to transfer the proceeds to centralized exchanges, like Binance, which are run by companies that manage trading and funds. Binance is working with authorities to recover and return stolen money to victims.
Real Estate Law and Cryptocurrency
Cryptocurrency and real estate law fraud are interconnected. Both concepts intersect fraudulent activities and schemes to exploit people.
First, there is the orchestration of Ponzi schemes. So, funds from new cryptocurrency investors are used to pay returns to earlier investors. Similar to the traditional Ponzi scheme, but revamped. This scheme collapses when the new investors funds are no more.
Second, there exists money laundering and illicit transactions. Cryptocurrency is used as a means to launder money and facilitate transactions related to real estate. Criminals use this tactic to purchase real estate, or transfer funds across borders to avoid detection of law enforcement agencies.
Third, Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) related to real estate projects are used as vehicles for fraud. Fraudulent projects may claim to tokenize real estate assets, or offer securities backed by real estate investments. But in the end, it is revealed that funds are misappropriated.
Action Steps
- Beware of fraudsters asking you to open and fund new crypto accounts.
- Be careful when sending cryptocurrency; once a transaction is completed, it is unlikely to reverse. 3. Be wary of individuals you have met on dating sites or social media who attempt to educate and convince you to invest in cryptocurrency.
- Fraudsters use the name of legitimate companies to lend credibility to the fraud; watch for spelling variations, verify the email addresses, URL’s, and contact information to confirm it is a legitimate company.
Professor Atty Mashatan’s Take on Cryptocurrency and Real Estate
Professor Atty Mashatan from Toronto Metropolitan University (TMU) explains that blockchain technology uses special cryptographic methods to link records together, making them tamper-resistant and unchangeable. This eliminates the chance of human error.
In home buying and selling, many parties are involved, including buyers, sellers, agents, financial institutions, and government agencies. Blockchain could prevent fraudulent activities by recording and displaying all bids, fund transfers, and title transfers transparently.
Future articles will explore the benefits of using cryptocurrency, blockchain technology, and real estate laws in this context.
References
“Blockchain: The solution to real estate fraud.” Toronto Metropolitan University, 2017, https:// www.torontomu.ca/research/publications/newsletter/2017-12/blockchain-solution/. Accessed 15 April 2024.
Faux, Zeke. “New Study Estimates as Much as $75 Billion in Global Victims’ Losses to Pig-Butchering Scam.” Time, 29 Feb. 2024, https://time.com/6836703/pig-butchering-scam-victim-loss-money- study-crypto/#:~:text=Pig%20butchering— a%20scam%20named,enough%20funds%2C%20the%20scammers%20disappear. Accessed 15 April 2024.
Girffin M., John and Kevin Mei. “How Do Crypto Flows Finance Slavery? The Economics of Pig Butchering.” Elsevier, 2024, pp. 1-53.
Lee, Austin. “‘Some of the toughest cases’: Investment fraud running rampant across Canada.” CTV News, 17 Jan. 2024, https://ottawa.ctvnews.ca/some-of-the-toughest-cases-investment-fraud- running-rampant-across-canada-1.6730689. Accessed 15 April 2024.