Understanding Pig Butchering Scams in the Crypto World

What Are Pig Butchering Scams?

Pig butchering scams, also known by the Chinese term sha zhu pan, are complex fraud schemes. Scammers build trust with victims, often posing as romantic partners or mentors. They then convince victims to invest in fake cryptocurrency platforms. Once funds are deposited, the scammer disappears, taking the victim’s crypto with them.

These scams pose significant dangers. They merge social engineering, deepfake technology, and synthetic account laundering to craft a convincing and devastating fraud experience.

How Synthetic Wallets Aid Scammers in Laundering Funds

A synthetic wallet is a blockchain wallet created using fake or synthetic identities. These wallets often pass KYC checks due to forged or AI-generated documentation. This allows fraudsters to:

• Obscure fund movement through multiple wallet layers.

• Simulate legitimate behavior using fabricated transaction histories.

• Launder stolen assets across various exchanges and DeFi protocols.

  
  

By constructing a web of accounts and wallets, scammers manage to evade detection and stall law enforcement or platform intervention.

Cryptocurrency Fraud

Real-World Examples of Pig Butchering Scams

Case 1: Alice’s Crypto Romance Scam

In 2023, Alice met a scammer on a language app. The scammer posed as a crypto investor. Over several weeks, they built a close relationship. Eventually, he convinced her to invest $50,000 in a fake platform. Alice even saw fake profits. However, when she tried to withdraw her money, the platform became unresponsive.

What happened behind the scenes:

• Her funds were redirected to multiple wallets and “chain-hopped.”

• The crypto was laundered through decentralized exchanges and privacy coins like Monero.

• Recovery was impossible due to wallet layering and the use of mixers.

  
  

Case 2: Bob’s Phishing and ATO Incident

Bob received a phishing email that looked like it came from a well-known exchange. Trusting the email, he clicked the link and entered his login credentials. Unfortunately, the scammers quickly took over his account. Funds were drained in just minutes.

Key tactics used by the scammers:

• They captured Bob’s login credentials and 2FA data.

• Funds were transferred to synthetic wallets on multiple blockchains.

• All traces of the transactions were obfuscated through layered movements.

  
  

Why This Matters for Virtual Asset Service Providers (VASPs)

If you're a Virtual Asset Service Provider (VASPs), failing to detect these scams can have severe consequences. The results can include:

• Financial losses resulting from mass account takeovers (ATOs).

• Regulatory fines from agencies like FinCEN and FCA.

• Brand damage and loss of user trust.

• Exploitation of your platform for laundering stolen funds.

  
  

How VASPs Can Protect Against Pig Butchering Scams

1. Advanced Identity Verification

To combat these scams, consider implementing:

• Biometric checks with robust liveness detection.

• Measures to detect deepfake attempts during video or photo KYC.

• Cross-check identities with device fingerprints and dedicated fraud databases.

  
  

2. Multi-Factor Authentication (MFA)

It's vital to enforce MFA for all withdrawals. Additionally, monitor for:

• Device spoofing.

• New login patterns that seem suspicious.

  
  

3. AI-Powered Transaction Monitoring

Employ advanced monitoring techniques:

• Build behavioral baselines for each user.

• Flag sudden large withdrawals or unusual geolocations.

• Integrate powerful tools like TRM Labs, Chainalysis, or Elliptic to enhance detection.

  
  

4. Synthetic Wallet Detection

To identify synthetic wallet patterns:

• Monitor wallet creation from correlated phone/email accounts.

• Score accounts using ML models trained on known synthetic identity patterns.

  
  

5. ATO Playbook and Response Plan

Having a clear response plan is essential:

• Establish escalation steps for freezing compromised accounts.

• Quarantine suspicious funds for thorough re-verification.

  
  

6. User Education

Educate your users on potential threats:

• Share useful tips on spotting phishing and romance scams, and recognizing deepfakes.

• Provide wallet security checklists and phishing simulation tools to reinforce security.

  
  

7. Industry Collaboration

Collaboration within the industry is crucial:

• Join networks focused on crypto fraud intelligence sharing.

• Report scam wallet addresses to blockchain analytics providers.

  
  

Final Thoughts

Pig butchering scams are more than just romance scams—they represent full-scale financial crimes. These operations leverage the latest technologies in synthetic identities and wallet laundering tactics. As scammers evolve, so must the defenses of VASPs and crypto wallet providers.

If you're operating in the crypto space, investing in fraud prevention is not just optional—it’s essential for survival.

Need Help Strengthening Your Crypto Platform’s Fraud Defenses?

At Orbis Intelligence, we help VASPs, financial institutions, and investigators stay ahead of evolving scam tactics. Contact us for a risk consultation, or subscribe to our alerts to receive updates on emerging fraud trends.

By being proactive, we can collectively safeguard our digital economies against the threats posed by scams.