Don’t Get Pig Slaughtered in a Cryptocurrency Scam

Today we need to have an honest discussion about the most significant growing scam category. Once you finish learning about it in this podcast, you will have to help spread the word to friends, family, and people you know. Don’t let them become a victim.

Although cryptocurrency has yet to become a mainstream payment method, reports to the Federal Trade Commission show it’s an alarmingly common method for scammers to get peoples’ money.

Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams – that’s about one out of every four dollars reported lost. That’s more than any other payment method. The median individual reported loss? A whopping $2,600. Bitcoin was the most prevalent requested cryptocurrency by scammers. Seven out of ten requests were for Bitcoin, 10 percent were for Tether, and 9% were Ether.

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As big as those numbers are, they still don’t give us a complete picture of the scam losses with crypto. The vast majority of frauds are never reported, so if we are just looking at reported numbers, it is a small percentage of total losses.

Crypto has several attractive features to scammers, which may help explain why the reported losses in 2021 were nearly sixty times what they were in 2018.

Losses continue to accelerate. In the first quarter of 2022, crypto scam reported losses are almost $330 million. If it continues at this rate, 2022 should end with about $1.5 billion in reported losses.

There’s no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens.

Crypto transfers can’t be reversed – once the money’s gone, there’s no getting it back. And most people are still unfamiliar with how crypto works. These considerations are not unique to crypto transactions, but they all play into the hands of scammers.

Reports point to social media and crypto as a combustible combination for fraud. Nearly half the people who reported losing crypto to a scam since 2021 said it started with an ad, post, or message on a social media platform.

During this period, nearly four out of every ten dollars reported lost to a fraud originating on social media was lost in crypto, far more than any other payment method.

The top platforms identified in these reports were Instagram (32%), Facebook (26%), WhatsApp (9%), and Telegram (7%).

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Of the reported crypto fraud losses that began on social media, most are investment scams.

Indeed, since 2021, $575 million of all crypto fraud losses reported to the FTC were about bogus investment opportunities, far more than any other fraud type.

People’s stories about these scams describe a perfect storm: false promises of easy money paired with people’s limited crypto understanding and experience.

Investment scammers claim they can quickly and easily get huge returns for investors. But those crypto “investments” go straight to a scammer’s wallet. People report that investment websites and apps let them track the growth of their crypto, but it’s all fake. Some people report making a small “test” withdrawal – just enough to convince them it’s safe to go all in.

When they really try to cash out, they’re told to send more crypto for (fake) fees, and they don’t get any of their money back.

Romance scams are a distant second to investment scams, with $185 million in reported cryptocurrency losses since 2021 – that’s nearly one in every three dollars reported lost to a romance scam during this period.

And many have an investment twist too. These keyboard Casanovas reportedly dazzle people with their supposed wealth and sophistication.

This strategy is called “pig slaughtering.”

Pig slaughtering, or butchering, is a type of scam in which an individual or group puts in weeks or months of work to build a fake relationship with the victim, metaphorically fattening them up. The end goal is to get the victim to invest in crypto via either a duplicated version of a legitimate website or by transferring funds to a dodgy wallet address.

People who take them up on the offer report that what they really got was a tutorial on sending crypto to a scammer. The median individual reported crypto loss to romance scammers is an astounding $10,000.

Here is an example, R’s case is notable as she is an IT manager from the Bay Area who lost around $1.3 million to the scam after first being approached via LinkedIn.

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Despite being well versed in computer tech, R stated that the scammer’s professional profile managed to win her trust by being listed as an alumnus of the same top tech university that she graduated from.
After the conversation moved over to WhatsApp, the scammer worked for a month before finally persuading R to invest in crypto via a dubious website that swiped her funds.

Another victim lost $1.2 million over two months and wound up in psychiatric care after suffering suicidal thoughts.

Business and government impersonation scams are next, with $133 million in reported crypto losses since 2021. These scams can start with a text about a supposedly unauthorized Amazon purchase or an alarming online pop-up made to look like a security alert from Microsoft. From there, people are reportedly told the fraud is extensive, and their money is at risk.

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The scammers may even get the “bank” on the line to back up the story. (Pro tip: it’s not the bank.) In another twist, scammers impersonating border patrol agents have reportedly told people their accounts will be frozen as part of a drug trafficking investigation.
These scammers tell people the only way to protect their money is to put it in crypto: people report that these “agents” direct them to take out cash and feed it into a crypto ATM. The “agent” then sends a QR code and says to hold it up to the ATM camera. But that QR code is embedded with the scammer’s wallet address. So once the machine scans it, their cash is gone.
People ages 20 to 49 were more than three times as likely as older age groups to have reported losing cryptocurrency to a scammer.

Reports point to people in their 30s as the hardest hit – 35% of their reported fraud losses since 2021 were in cryptocurrency. But median individual reported losses have tended to increase with age, topping out at almost $12,000 for people in their 70s.

Here are some things to know to steer clear of a crypto con:

  • Only scammers will guarantee profits or big returns. No cryptocurrency investment is ever guaranteed to make money, let alone big money.
  • Nobody legit will require you to buy cryptocurrency. Not to sort out a problem, not to protect your money. That’s a scam.
  • Never mix online dating and investment advice. If a new love interest wants to show you how to invest in crypto, or asks you to send them crypto, that’s a scam.

If you feel you’ve been the victim of a scam, please report it to the Federal Trade Commission or Consumer Financial Protection Bureau. The more submitted reports, the more precise the trail is to find the scammers.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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