University of Texas prof uncovers $75b crypto scam: 🐷💰

🔍 Pig-butchering Crypto Scams Drain Over $75 Billion, Study Finds

A recent study conducted by professors from the University of Texas reveals alarming findings about pig-butchering crypto scams. According to the research led by finance professor John Griffin and graduate student Kevin Mei, these scams may have siphoned off more than $75 billion from victims worldwide. The study, which spanned four years from January 2020 to February 2024, involved tracking the flow of funds from over 4,000 victims who fell prey to predominantly Southeast Asia-based scammers.

Understanding Pig-butchering Scams

Pig-butchering scams typically start with unsolicited text messages that lure individuals into fraudulent crypto investments. Unfortunately, these scams often result in significant financial losses for the victims.

The Flow of Funds in Pig-butchering Scams

The research sheds light on how scammers operate and interact with major crypto exchanges. They employ various tactics to build trust with victims and eventually drain funds. Here’s an overview of their modus operandi:

Scammers freely engage with major crypto exchanges.
They send over 100,000 small potential inducement payments to establish credibility.
Funds exit the crypto network in large quantities, primarily in Tether (USDT).
The funds are funneled through “less transparent but large exchanges” such as Binance, Huobi, OKX, Crypto.com, and Coinbase.

This flow of funds through major exchanges makes it easier for scammers to move money undetected.

Challenges in Quantifying the Total Amount

While the study provides valuable insights into the scale of pig-butchering scams, accurately quantifying the total amount remains challenging due to underreporting. Paolo Ardoino, the CEO of Tether, has expressed skepticism about the findings. He emphasizes that Tether is committed to working with law enforcement to combat fraud and asserts that every action on their platform is traceable and can lead to the identification and seizure of assets.

The Ongoing Exploitation of Decentralized Finance

Despite efforts by authorities and blockchain analysis firms to combat these illicit activities, criminals continue to exploit decentralized finance protocols for money laundering. Griffin and Mei point out that the legitimate crypto space often serves as both the entry and exit point for illegal activities. They describe it as the “lifeblood” that enables pig butchering scams and other criminal operations. The study highlights that criminal networks can move substantial funds inexpensively and without much fear of detection.

🔥 Hot Take: Combating Pig-butchering Scams Requires Collaborative Efforts

Addressing the issue of pig-butchering crypto scams demands a collective approach from various stakeholders, including individuals, exchanges, regulators, and law enforcement agencies. Here are some key takeaways:

Individual Vigilance

Be cautious of unsolicited messages offering lucrative crypto investments.
Research thoroughly before engaging in any investment opportunity.
Avoid sharing personal information or financial details with unknown individuals or platforms.

Exchange Responsibility

Crypto exchanges should enhance their security measures to detect and prevent scam-related transactions.
Collaborate with law enforcement agencies to share information about suspicious activities.
Educate users about common scams and how to identify and report them.

Regulatory Measures

Regulators should establish clear guidelines and regulations to combat crypto scams.
Implement stricter Know Your Customer (KYC) procedures to prevent scammers from operating anonymously.
Cooperate with international counterparts to strengthen global efforts against pig-butchering scams.

Law Enforcement Collaboration

Law enforcement agencies should prioritize investigating and prosecuting pig-butchering scams.
Work closely with crypto exchanges and blockchain analysis firms to track funds and identify culprits.
Raise awareness among the public about the risks associated with crypto scams and encourage reporting.

By coming together, individuals, exchanges, regulators, and law enforcement can create a safer environment for crypto investors, mitigating the impact of pig-butchering scams and other fraudulent activities in the industry.