FinCEN issues an alert as crypto “pig butchering” scams become increasingly sophisticated with scammers using strategies such as play-to-earn gaming to defraud victims.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN)  issued an alert on crypto “pig butchering” scams as victims in the US are estimated to have lost billions from the scams.

Multiple US law enforcement sources estimate victims in the US have lost billions of dollars to pig butchering scams and other crypto investment frauds, the agency said. Individuals lost at least $429 million to romance-focused pig butchering crypto and investment scams in the US in 2021, according to a report from the U.S. Federal Bureau of Investigation (FBI). Another report from the agency showed that losses from cryptocurrency investment frauds rose 183% from $907 million in 2021 to $2.6 billion in 2022.

Pig butchering is a type of scam that resembles the practice of fattening a hog before slaughter, the agency said. The scammers develop fictitious identities and “fatten up” the victim by making them believe they are in a trusted relationship or friendship with them before then defrauding the victim of their assets. In many cases, the scammers have previously been victims themselves. These scams are often perpetrated by criminal enterprises based in Southeast Asia, the agency said.

The scam often includes either convincing the victim to invest in virtual currencies or over-the-counter foreign exchange schemes, the alert said. In some cases, the scammer may encourage the victim to involve friends and family in the scheme.

“In more recent iterations, the scammer will invite the victim to join online or mobile games, advertised as ‘play-to-earn’ games offering financial incentives to players, but which in reality are fake gaming applications created by the scammer to steal virtual currency from players,” the alert said.

In recent months, news agencies have reported heart-wrenching stories of “pig butchering” scams. Wired shared the story of Evelyn, a newly single woman in her 50s, who fell for a man named Bruce who  conned her out of $300,000 from her retirement savings. Forbes told the story of 52-year-old Cy who lost over $1 million in a pig butchering scam that  played out via  months-long back-and-forth WhatsApp conversations, which ran over 271,000 words in total.

Crypto pig butchering scams have doubled this year compared to last, according to a recent report from crypto exchange Binance.

“This scam has impacted far too many Americans, which is why FinCEN is sounding the alarm and asking financial institutions to report suspicious activity indicative of this scheme,” said Himamauli Das, acting director at FinCEN, in the release.  “Suspicious Activity Reports filed by financial institutions will enable law enforcement to both aid victims and track down the perpetrators.”  

The agency, which aims to safeguard the US financial system from illicit money use by using financial data collection and analysis, is calling on financial institutions to do more and has provided a list of red flag indicators to help them detect, prevent and report suspicious activity related to the scams.

Financial institutions are not only being encouraged to file suspicious activity reports with FinCEN, but also to refer their customers who may be victims of pig butchering to the FBI’s internet crime complaint unit and the U.S. Securities and Exchange Commission’s (SEC) referral system to report investment fraud.