The US Department of Justice (DOJ) has arrested two Chinese nationals, Daren Li and Yicheng Zhang, for orchestrating a massive crypto scam known as “pig butchering.” This scheme led to the laundering of at least $73 million.
The arrests highlight that pig butchering scams remain a significant concern in the crypto industry.
The Duo Ran an International Scam Syndicate
According to the DOJ, officials arrested Li on April 12 at Hartsfield-Jackson Atlanta International Airport and transported him to the Central District of California. Meanwhile, Zhang was arrested in Los Angeles.
“We announce the arrests of two foreign nationals charged for leading a scheme to launder funds tied to an international crypto investment scam. Crypto investment scams exploit the borderless nature of virtual currency and online communications to defraud victims,” Deputy Attorney General Lisa Monaco said.
The DOJ discovered extensive coordination from their communications to facilitate international money laundering, including chats discussing the network’s commission structure, various shell companies used, victim information, and at least one video of a conspirator calling a US financial institution.
Li and Zhang managed an international syndicate of pig butchering investment scams. The duo instructed co-conspirators in the laundering network to open bank accounts in the names of shell companies. Once the victims sent funds to the shell companies, Li and Zhang monitored the lower-level co-conspirators who transferred the proceeds overseas to bank accounts at Deltec Bank in The Bahamas.
The scheme involved more than $73 million converted to the USDT stablecoin. Additionally, a cryptocurrency wallet in the scheme received more than $341 million in virtual assets.
Li and Zhang are charged with conspiracy to commit money laundering and six substantive counts of international money laundering. They face a maximum penalty of 20 years in prison on each count if convicted.
In response to this case, Assistant Director of Investigations Brian Lambert of the US Secret Service explained that the US financial infrastructure is under threat from complex financial fraud schemes.
“Complex financial fraud schemes such as pig butchering present a clear and present threat to the financial infrastructure of the US as countless numbers of Americans continue to be victimized by this predatory activity,” Lambert said.
Lambert’s statement aligns with Federal Bureau of Investigation (FBI) data. According to the 2023 Internet Crime Report from the FBI, investment fraud was the costliest crime tracked by IC3.
Read more: Crypto Scam Projects: How To Spot Fake Tokens
Losses to investment scams rose from $3.31 billion in 2022 to $4.57 billion in 2023, a 38% increase. Confidence/romance crimes accounted for 17,823 complaints throughout the year.
False Promises and Empty Wallets: The Anatomy of Pig Butchering Scams
Pig butchering scams involve fraudsters creating fake identities to connect with potential victims, typically via text messages, social media platforms, or dating apps. Gradually, these scammers build seemingly genuine relationships with their targets through regular and friendly interactions. This method resembles the practice of fattening a pig before butchery, hence the name.
Once relationships are established, scammers introduce cryptocurrency into the dialogue. They typically don’t request money or cryptocurrency directly. Instead, they offer to help victims with their investment strategies and direct them to send money to platforms under their control.
Initially, victims may transfer small amounts to a cryptocurrency exchange. To keep the scam believable, scammers provide fake account information showing the victims’ investments are increasing.
They might even allow victims to withdraw a portion of their initial investment to appear legitimate. Scammers persist in pressuring victims to send more money until they are completely drained of funds.
Read more: 15 Most Common Crypto Scams To Look Out For
A United Nations report describes the Mekong region of Southeast Asia as the primary hub for this criminal activity. An increasing number of casinos blend with ungoverned borders and armed groups in Myanmar’s long-running civil conflict. This background creates ideal conditions for massive money-laundering operations.
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