The Federal Bureau of Investigation (FBI) has warned users of financial products, including crypto users of the rising incidents of the ‘pig butchering’ cyber scam. It has warned victims to be aware of the scam lest they fall prey to it and lose their money.
US Secret Service Special Agent Shawn Bradstreet has said in an interview with Bitcoin.com, “Once they [the victims] see how easy it is to invest, they see a rise in their screen account, and then they end up investing their entire life savings in a matter of days.”
Mridul Gupta, COO, CoinDCX, an crypto exchange, said, that before investing in crypto assets, "the investors must acquaint themselves with some key elements such as choosing a compliant exchange that follows proper KYC verifications methods. To identify a reliable exchange, one must evaluate the audit information of the exchange as they help in understanding the financial health of a company."
What Happens In This Cyber Scam?
Indians are no outsider to this type of scam. A resident of Ladakh (name withheld) had also fallen victim to this ‘pig butchering’ scam about six months ago, and it involved a lady from Hong Kong. He had lost savings worth about Rs 90 lakh in this scam.
Karmesh Gupta, co-founder and CEO, WiJungle, a Haryana-based cyber security company, said that 'pig butchering' cyber scam started four years ago in China. Getting the money cross border was difficult earlier because it used to be a normal online scam. But nowadays crypto gives you a chance to move your money cross border, from one geography to the other.
Vijay Pravin Maharajan, founder and CEO, bitsCrunch, a Germany-based Blockchain analytics company, says that the ‘pig butchering’ scam is a new name given to an old scam, which earlier used to occur with financial products, and has now found its way into the crypto world.
According to Satnam Narang, senior staff research engineer, Tenable, a US-based cyber security solutions company, this scam involves the scammers using various dating apps, chat messaging apps, and others to lure users in by giving falsified promises, and assurances of a relationship.
After gaining a user’s trust, they redirect the users to invest in a fake product website like a fake cryptocurrency website, or other types of fake financial platform, such as a fake stock exchange. Then these scammers encourage the user to undertake investments in that exchange, and the exchange’s front-end interface also shows the growth of the money invested. But when the user tries to withdraw that money, that does not happen due to some reason, and the user ends up getting scammed.
Maharajan said that in the world of crypto, scammers, instead of asking for money upfront, gradually convince their target to relocate their cryptocurrency away from legitimate wallets or exchanges onto websites that are fraudulent and are controlled by the scammer.
“These websites have been designed to appear as if they are authentic trading platforms,” adds Maharajan.
The user from Ladakh also faced the same problem. A girl from Hong Kong connected with him and told him about a crypto exchange platform where he could possibly earn millions.
“I could see my money growing by 2-3 per cent within hours of my investment, and then I would invest more money every week and later every day, too. It became a habit to invest every day, and I was waiting for my money to grow big so that I could finally withdraw it one day,” says the user from Ladakh.
Gupta of WiJungle said that the motive is to get you comfortable for a free and an informal conversation. At the end of the day they direct the conversation to an investment, this process usually takes a week or more than that. The person keeps his patience so you do not feel it's a scam. They will try to understand about your current investments, stocks, mutual funds and lastly about crypto which is the key aspect.
But when he tried to withdraw the money, he was told that the crypto exchange will deduct tax at the rate of 30 per cent and deposit it to the Indian income tax authorities, so he will need to pay the tax money upfront before withdrawing his profits.
“I paid this 30 per cent tax on my gains, too, but even after that, they did not let me withdraw my money,” he says.
This supposed crypto exchange did not ask for his PAN card details or Aadhaar, or any kind of know-your-customer (KYC) information. Still, it was claiming to deposit income tax on the user’s behalf with the income tax department of India.
Gupta of CoinDCX pointed out that every crypto investor must know that the 30 per cent tax is payable by the investor as part of his annual income tax return and is paid by the investor directly. The 30 per cent tax is not deducted by the exchange, whereas 1 per cent TDS is deducted by the exchange and paid to the government.
Gupta of WiJungle advised users that one can only save themselves if you simply ignore such texts. Ignore having any sort of financial transactions with people you have never met or are complete strangers. Never believe strangers for any type of investment advice. Being cautious can save you from being scammed. Trust but verify every single piece of information someone gives you. Most importantly avoid such messages at the beginning itself and conversations with strangers that may later cause you financial trouble.
Red Flags To Watch Out For
Pig butchering is a long duration scam: The term itself means that pigs are fed, fattened up, and then butchered. Likewise, the scammers don’t do a one-off big scam with each user once. They slowly build up a rapport with the victim and then take small steps to develop the relationship.
“The pig butchering phenomena is part of a long con, so it may not be immediately apparent to the victim that they’re being fed lies in order to develop a fake relationship and gain their trust. So, users should be very wary when being contacted out of the blue in various dating, chat messaging apps, and others by strangers,” says Narang.
Frequent show-off can make you a target: These scammers scan various dating and social media websites for prospective targets. Narang says that one of the key metrics which they use to sort out targets is to see which users are talking about their success with traditional or alternative investments, or others like cryptocurrency, or, who has a lot of interest in these topics.
So if you get any investment offer which sounds too good to be true, don’t become gullible and fall prey to it. Instead, leave out of it and report to the authorities.
Love bombing right from the start: One of the signs of you getting scammed is when you get love bombed, i.e., when the scammer tells extremely nice things about you, although you two have hardly known each other.
Pune police last year arrested a 27-year-old woman who used to do this type of scam. She used to create multiple dating profiles of her and love bomb men and then ask them to come to Pune, where she would rob them off.
Krishna Prakash, police commissioner (CP) of Pimpri-Chinchwad police commissionerate, told Mumbai Mirror that the woman earlier worked in a telecom company.
“After the lockdown, she did not have a job. In the last one year, she robbed 16 men in Pune and Pimpri-Chinchwad through dating apps. The police have seized a total amount of Rs 15.25 lakh in cash from the accused, besides 289 grams of gold and cell phones. She planned to target men and women who are not residents of Pune, but from other states,” the paper quoted Prakash as saying.