Crypto Romance Scams Surge, Revenue Doubles: Chainalysis Report
A new report from Chainalysis reveals that crypto activity associated with “pig butchering” romance scams has increased by 85 times compared to 2020. Additionally, the revenue generated from these scams has doubled from 2022 to 2023. Despite a decline in the total value sent to scams, romance scams have continued to grow over this period.
The report also highlights a decrease in Ponzi schemes, which the authors attribute to the bear market in 2023 and high-profile investigations deterring potential victims.
The Rise of Pig Butchering Romance Scams
Pig butchering scams involve scammers using social engineering tactics to establish online romantic relationships with victims. After gaining their trust, scammers persuade victims to give them access to their funds by claiming they are making significant profits through crypto investments. The scammers exploit the victims’ lack of knowledge about cryptocurrencies to deceive them into providing access to their funds.
Adam Hart, Senior Investigator at Chainalysis, explains that scammers trick victims into performing technical actions they don’t understand, such as signing transactions. Over time, the scammers gradually convince victims to invest more money into the application without their knowledge that it is compromised.
The Financial Impact on Victims
The Chainalysis Crypto Crime Report reveals that romance scams have the most severe financial impact on victims. In 2023, the average payment size for romance scams was $4,593, followed by NFT scams at $3,095.
Hart explains that victims of romance scams are more likely to invest larger sums of money because they believe they are contributing to something profitable for their loved ones. However, the violation of trust experienced by victims makes the non-financial impact particularly devastating.
Underreporting and On-Chain Footprints
Hart suggests that many romance scams go unreported due to the shame victims feel after being deceived. However, once reported, these scams leave a unique on-chain footprint.
Pig butchering scammers do not immediately consolidate funds into one account; instead, they use victim-specific addresses that are not reported or blocked. In contrast, other scams like Ponzi schemes pool victims’ money into one wallet before disappearing.
The Culprits Behind Pig Butchering Scams
Romance scammers are typically organized groups that take precautions to launder funds and conceal their activities. Despite their efforts, it is challenging for them to avoid leaving traces when handling large amounts of money.
Law enforcement agencies have made progress in apprehending some romance scammers. For example, an Interpol-led operation in December 2023 resulted in the arrest of 3,500 suspected cyber scammers and the seizure of $300 million related to pig butchering and other scams.
Reports indicate that the individuals scamming pig butchering victims are often themselves victims of human trafficking. They are coerced into working for the scammers under threats of reprisals.
This type of operation has prompted action from authorities, such as Chinese police arresting two powerful warlords running scam centers in Myanmar. This development has also led to China’s involvement in the civil war in the region.
Hot Take: Protect Yourself from Romance Scams
Romance scams involving cryptocurrencies continue to rise at an alarming rate. It is crucial to be aware of these scams and take steps to protect yourself:
1. Be skeptical:
- Exercise caution when engaging in online relationships, especially if the other person pushes you to invest in cryptocurrencies.
- Be skeptical of promises of quick and substantial profits.
2. Educate yourself:
- Learn about cryptocurrencies and how they work to avoid falling for scams that exploit your lack of knowledge.
- Stay updated on common scam tactics and be vigilant.
3. Secure your funds:
- Keep your cryptocurrency assets in a secure wallet that you control.
- Avoid sharing sensitive information or granting access to your funds to anyone you do not fully trust.
By staying informed and cautious, you can protect yourself from falling victim to romance scams and ensure the security of your crypto investments.
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