A sinister romance scam that preys on lonely hearts to steal their crypto savings has swindled over $100 million from victims in less than two years alone, according to a recent bombshell report.
Dubbed “pig butchering” after the method farmers use to fatten up pigs before slaughter, this scam typically begins innocently enough with a wrong number text. The fraudsters build trust with small talk and token crypto payments, eventually convincing victims to invest in fake opportunities and disappearing after they send large sums.
Now, new findings reveal the vast criminal enterprise lurking behind the scenes. Analysts at blockchain firm Chainalysis tracked activity of Tether, a widely-used stablecoin, to expose pig butchering’s deep ties to human trafficking in Myanmar.
They found that one company based at the notorious KK Park compound in eastern Myanmar raked in over $100 million in Tether from victims’ crypto wallets in under two years. Tether was also used to collect ransom payments from families of trafficked workers held at KK Park.
Their analysis exposes the extensive role of cryptocurrencies in enabling cross-border criminal activity. Tether’s dollar-peg and integration with Tron, now one of crypto’s largest networks, make it an ideal payment rail for scammers.
KK Park’s Location in Myanmar Raises Alarms
KK Park’s location in Myanmar is especially alarming. The compound is located near the country’s border with Thailand in a region controlled by an ethnic armed group, beyond the reach of most authorities.
IJM estimates thousands of trafficking victims are held there, forced into scams like pig butchering. The organizations did not name the Chinese company to protect current workers.
Myanmar’s military government is already accused of genocide against the Rohingya minority. Now, these findings suggest the country has become a haven for transnational cybercrime as well.
Victims with little crypto experience are lured into sending their life savings. It is estimated that $75 billion has been stolen since 2020, with everyday investors accounting for $15 billion in deposits to shady accounts.
Tether Implicated in Money Laundering
Experts say Tether is complicit in enabling these crimes, despite its pledges to work with authorities. Tether tokens allow scammers to mask transfers and cash out through decentralized exchanges.
Tether has blacklisted nearly 1,300 wallets linked to pig butchering, freezing $276 million so far. But advocates say much more needs to be done to stop stablecoins from becoming digital money laundromats.
Last month, the UN warned Tether was emerging as a payment method of choice for criminals in Southeast Asia. Tether has blown up into a $100 billion juggernaut by pitching convenience and privacy to crypto users.
Now, those same qualities prized by legitimate traders help bad actors operate unchecked. Tether offers irreversible transactions that can be instantly resettled anywhere in the world.
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Scammers Leverage Tron’s Low Fees
Pig butchering schemes heavily leverage Tron’s blockchain due to rock-bottom transaction fees. Tron founder Justin Sun is accused of securities violations but denies wrongdoing.
The network processes over $5 billion in daily volume as the cornerstone of DeFi ecosystem Tron DAO. Still, many institutions remain wary of Tron’s lax compliance standards compared to rivals like Ethereum.
Those concerns appear validated by the latest pig butchering revelations. On Tuesday, Tether competitor Circle announced it will no longer support stablecoin transfers on Tron, cutting off a key money laundering artery.
Over half of all Tether circulates on Tron. Tether CEO Paolo Ardoino praised Tron’s speed for crypto users who “want something that works.” But works for whom?
For pig butchering scammers, Tron works perfectly. Reports suggest that most of the $100 million pilfered by the Myanmar ring was Tron-based Tether. Together, Tether and Tron enable shady transactions to vanish down a blockchain rabbit hole.
Scammers Are Trafficking Victims Themselves
Here is where pig butchering departs from typical cybercrime. Many low-level scammers are trafficked and enslaved themselves.
Lured by work abroad, victims are trapped in compounds like KK Park and coerced into scams under threat of violence, researchers say. UN data suggests up to 500,000 people are held in Southeast Asia compounds.
Some pig butchering funds also appear to finance trafficking operations. Scammers first launder stolen crypto through Tether and dex exchanges to hide the money trail. Eventually, funds end up on centralized platforms where they can be cashed out.
But following crypto flows requires concerted global coordination between law enforcement, which remains a work in progress. Many agencies lack blockchain expertise, and regulation lags behind fast-moving technologies. That leaves networks like Tether and Tron operating in gray zones that scammers readily exploit.
For now, Tether faces growing calls to clean up its act or risk further enabling mass financial crimes. Victims have few recourses to recover lost savings, especially with scammers obscured behind blockchain veils.
Raising awareness of pig butchering’s devious methods is critical to caution potential victims. But lasting solutions require coordinated pressures to enact reforms across the crypto industry worldwide.
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