Chinese Criminal Gangs Drive Rise in Pig-Butchering Scams as Victims Despair

Romance scams, often referred to as "pig butchering scams" or “sha zhu pan” (杀猪盘) in Chinese due to the way perpetrators "fatten up" their victims to extract maximum value, are a significant and escalating problem, particularly within the cryptocurrency space.

These scammers build a relationship with their victims over time, typically posing as potential romantic partners.

Initial contact is often made through a supposed wrong number text message or dating apps.

As the relationship deepens, the scammer eventually persuades the victim to invest in a fake investment opportunity, using either cryptocurrency or fiat money, and continues to do so until severing contact.

Below is an example of a scammer message.

Source: Coindesk

These criminals are adept at crafting compelling narratives and targeting their victims through personal communication channels, which leaves minimal trace for authorities to follow.

This lack of traceability not only complicates the recovery of lost funds but also intensifies the emotional distress experienced by the victims.

Romance Scams Up 85-Fold Since 2020

The FBI's 2022 IC3 Report indicates that Americans reported over $700 million in losses to romance scams involving both cryptocurrency and fiat, and nearly $2.5 billion to crypto investment scams of any kind.

These figures exclude victims in other countries, such as China, where residents are also heavily targeted.

The most recent Crypto Crime Report by Chainalysis disclosed that approximately $24.2 billion was pilfered through cryptocurrency-related scams in 2023.

Source: Chainalysis 2024 Crypto Crime Report

The report noted:

“…many crypto scammers have now adopted romance scam tactics, targeting individuals and building relationships with them in order to pitch them on fraudulent investing opportunities, rather than advertising them far and wide, which often makes them more difficult to uncover."

Source: Chainalysis 2024 Crypto Crime Report

Chainalysis has noted a dramatic rise in such scams, with the incidence of romance scams increasing 85-fold since 2020.

This alarming trend underscores the growing frequency and severity of these scams, highlighting the darker side of digital progress.

The escalation of romance scams reflects not only financial losses but also the emotional toll on victims, driven by their quest for love and trust.

The report elaborated:

“The bad actors behind romance scams (also frequently known as "pig butchering" scams), for instance, often communicate addresses to victims in one-to-one communication channels like text, and unless victims report their losses to the authorities — far from a guarantee — it can be difficult for blockchain analysts to identify those addresses as scam-related, especially as compared to the enormous crypto ponzi schemes we've seen in years past, which go out of their way to advertise themselves to the masses. These complications likely cause more undercounting of scam activity, especially in the past two years as romance scams have become more prevalent.”

Source: Chainalysis 2024 Crypto Crime Report

In Asia, fraudsters have become increasingly prevalent since the COVID-19 pandemic, with a significant number operating from compounds in Southeast Asia, targeting victims worldwide with fake investment schemes.

Criminal groups in Cambodia, Laos, and Myanmar are stealing approximately $43.8 billion annually through scams, equating to about 40% of the combined GDP of these nations, according to a report released by the United States Institute of Peace (USIP).

These scams often involve "pig butchering" schemes.

Despite growing international awareness, scam activity continues to rise.

Jason Tower, Myanmar country director at USIP, said:

“This has gone from being very much a regional issue that was focused on criminal markets within the region to a global issue in a very short period of time. And it's spreading into other countries… There's new linkages into the Middle East, into Africa, that the same criminal actors are beginning to exploit."

Brandon Yoder, Deputy Assistant Secretary at the State Department's Bureau of International Narcotics & Law Enforcement, emphasized that addressing the “growing threat posed by these scam operations and their impact on the American people" is a national security priority.

Chinese Criminal Groups Extend Reach Globally

Based on USIP's report, Southeast Asia has emerged as a hub for transnational criminal networks, primarily originating from China.

These organisations exploit millions of victims globally through illegal and unregulated online gambling and sophisticated scams.

By the end of 2023, the annual value of funds stolen by these syndicates was conservatively estimated at $64 billion.

The relationship between these criminal groups and the Chinese government is a complex web of conflicting incentives and mutual benefits.

While Chinese law enforcement targets some of the criminals behind these networks, others remain untouched.

China's stringent anti-gambling laws have driven organised crime groups to Southeast Asia, where they can exploit this lucrative market from a safer distance.

These groups often form alliances with local elites to shield themselves from Chinese law enforcement.

Although Chinese police conduct campaigns to crack down on illegal online gambling, fraud, and money laundering both domestically and internationally, these crime networks maintain close ties with members of the Chinese Communist Party and collaborate with various Chinese state actors, including business enterprises, party agencies, and quasi-governmental institutions.

Beijing seems to view the expanding global reach and influence of criminal groups as a strategic asset to advance its Belt and Road Initiative and the new Global Security Initiative, which directly challenges established global security norms.

In countries like Cambodia and Laos, Chinese authorities have discovered that local leaders are willing to align closely with China politically in exchange for Beijing turning a blind eye to profitable criminal activities.

This arrangement allows China to extend its influence while disregarding the illicit operations that bolster its political allies.

Recent documentaries on major US and international media outlets have shed light on the experiences of victims across the US who have collectively lost billions to sophisticated scams and fraud orchestrated by malign actors in Southeast Asia.

In 2023 alone, Americans and Canadians are estimated to have lost $3.5 billion and $350 million, respectively.

In December 2023, the US DOJ announced the indictment of four individuals based in the US for allegedly laundering over $80 million in scam profits, confirming that these criminal groups are now operating on American soil.

This scamming industry could soon rival fentanyl as one of the top threats posed by Chinese criminal networks to the United States.

Less than a week ago, the US DOJ has pressed charges against two Chinese nationals for their alleged involvement in a sophisticated crypto scam known as the "pig butchering" scheme, alongside laundering millions of dollars.

According to a press statement by the DOJ, Daren Li and Yicheng Zhang, both Chinese citizens, are accused of orchestrating the pig butchering scam.

Prosecutors allege that Li and Zhang laundered a staggering $73 million, with their associated crypto wallet receiving over $340 million worth of digital assets.

Facing charges of conspiracy to commit money laundering and six counts of international money laundering, the duo could potentially serve up to 20 years in prison for each count.

Then in April, US tech behemoth Google initiated a lawsuit against two Chinese developers in a New York federal court, alleging their involvement in defrauding approximately 100,000 individuals via counterfeit cryptocurrency investment applications hosted on the company's Play Store platform.

According to the lawsuit filed by Google, Yunfeng Sun based in Shenzhen and Hongnam Cheung in Hong Kong orchestrated a sophisticated "pig-butchering" scam since 2019.

This scam entailed the deployment of 87 fraudulent apps masquerading as legitimate cryptocurrency exchanges and investment platforms on the Play Store, targeting unsuspecting users in the US and Canada.

Another striking example is the well-known KK Park in Myanmar, which has gained notoriety as a hub for "pig butchering" scams.

This facility has been associated with over $100 million in stolen funds, exploiting families by demanding cryptocurrency ransoms for the release of trafficked individuals.

The report disclosed its location, which was built between February 2020 and February 2022:

“Located in the aforementioned Myanmarese town of Myawaddy, KK Park is reported to hold over 2,000 trafficked romance scam workers."

Satellite image of KK Park sourced from Chainalysis 2024 Crypto Crime Report

In this region, the government holds little power, allowing criminal gangs to operate with near impunity under the protection of local ethnic armed groups, whom they pay for security.

These conditions have turned the area into a haven for Chinese crime syndicates.

In 2023, Myanmar authorities transferred over 44,000 suspected online scammers to Chinese authorities as part of a joint law enforcement operation, according to a report by China's state broadcaster CCTV in January.

Additionally, in a recent operation last month, Myanmar authorities arrested 807 suspects, comprising 455 Burmese nationals and 354 Chinese nationals, as reported by the state-run Xinhua news agency earlier this month.

Then in March, hundreds of individuals were rescued from a scam centre in the Philippines where they had been forced to pose as online lovers.

The police raided the facility, located about 100km north of Manila, and rescued 383 Filipinos, 202 Chinese, and 73 other foreign nationals.

Disguised as an online gambling firm, the centre was exposed after a Vietnamese man, who had managed to escape in February, alerted authorities.

This man, in his 30s, had arrived in the Philippines in January under the false promise of a chef's job, according to Winston Casio, spokesman for the presidential commission against organised crime.

Those trapped in the Bamban centre were coerced into sending "sweet nothings" to their victims, primarily Chinese nationals, asking personal questions and sending photos to build relationships.

Casio noted that the scam operators specifically recruited attractive individuals to ensnare their victims.

Then in May of last year, Philippine authorities carried out their largest bust to date, rescuing over 1,000 individuals who were being held captive and coerced into running online scams within a freeport zone in Clark, located north of Manila.

The victims included individuals from China, Vietnam, Singapore, and Malaysia, as well as from Indonesia, Pakistan, Cameroon, Sudan, and Myanmar.

During the police raids on the compound, over 2,700 people were detained, with more than 1,500 of them being Filipinos.

Crypto is the Currency of Choice for Fraudsters

Regrettably, cryptocurrency, known for its privacy and decentralised structure, has emerged as the preferred currency for fraudulent activities.

Its digital nature and the anonymity it provides make it an ideal tool for perpetrating scams.

The challenges of tracing fraudulent blockchain addresses often result in these illicit activities going unnoticed.

Governments across Asia, spanning from Indonesia to Taiwan, have voiced concerns about the proliferation of scam operations.

Foreign embassies in countries like Cambodia and Thailand have issued advisories cautioning their citizens against falling victim to these schemes.

In response to the surge in scam centres, China has offered public rewards for apprehending criminal groups operating in neighbouring Myanmar.

These syndicates, managed by Chinese mafia networks, specifically target Chinese nationals, leading to numerous arrests and subsequent repatriations to China in recent months.