US authorities have charged four people for their alleged roles in a fraudulent cryptocurrency investment scheme that cost victims more than $80 million.
Lu Zhang, a 36-year-old woman from Alhambra, California; Justin Walker, 31, of Cypress, California; Joseph Wong, 32, of Rosemead, California; and 40-year-old Hailong Zhu, of Naperville, Illinois, have all been charged in relation to the alleged “pig butchering” scam that saw targets approached via dating sites and social media.
“Pig butchering” fraud is a prevalent and fast-growing category of scam. Typically, fraudsters lure unwary victims into an online romance (typically having made an initial approach via a dating site, social media message, or even masquerading as a wrong number). Having slowly built up trust over time, “fattening up” their target, scammers manipulate their victim into making investments in a cryptocurrency platform… in the belief that massive profits can be earnt.
The truth, of course, is that the only massive profits which will be made are by the scammer themselves.
A victim sends funds to an “investment account” that is actually controlled by the scammer, and initially falsely shows significant financial gains are being made, encouraging further investment. However, victims ultimately discover that they are unable to withdraw their funds, which has been bilked by the fraudster.
Sadly, victims of such scams have been known to take out loans or dig into their savings in order to send funds to scammers that they sincerely believe to be their friends or romantic partners.
According to a press release by the US Department of Justice, Zhang, Walker, Wong, and Zhu conspired to open shell companies and bank accounts to launder the proceeds of victims’ of cryptocurrency investment.
In all it is alleged that there were at least 284 transactions, resulting in more than $80 million of victim losses, with over $20 million in victim funds directly deposited into the bank accounts of shell companies set up by the defendants.
So, if you find yourself in a digital romance with someone who suggests making a cryptocurrency investment, or even suggests that you transfer money into an account they control so they can make the investment on your behalf, tread extremely cautiously.
The US Department of Justice recommends that if you believe you have fallen victim to a pig butchering scam, or if someone you know is a victim, report it to the FBI’s Internet Crime Complaint Center (IC3) referencing “Pig Butchering PSA.”
In particular, the IC3 is keen to hear the names of suspect investment platforms, cryptocurrency addresses and transaction hashes, bank account information, alongside the names and contact information of suspected scammers. You are also urged to maintain copies of all communications with scammers and records of financial transactions.
Earlier this year, the FBI offered the following advice:
- If an unknown individual contacts you, do not release any financial or personal identifying information (PII) and do not send any money.
- Do not invest per the advice of someone you meet solely online.
- Confirm the validity of any investment opportunity or cryptocurrency investment website or app.
- If you already invested funds and believe you are a victim of a scheme, do not pay any additional fees or taxes to withdraw your money.
- Do not pay for services that claim to be able to recover lost funds.
Lu Zhang and Justin Walker appeared in court on Wednesday, where they pleaded not guilty. They face up to 20 years in prison if convicted, at a trial which is scheduled for February 6 2024 in Los Angeles.
Joseph Wong and Hailong Zhu, are currently being sought by federal authorities.