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Pig butchering, a type of romance scam, combines investment fraud and human trafficking to become a massive criminal enterprise costing billions of dollars worldwide.
In one notable case in November 2023, Tether and OKX worked with the US Department of Justice to freeze 225 million USDT related to human trafficking and romance scams.
Another successful investigation by Chainalysis, OKX, Binance, and Tether resulted in the freezing of approximately 50 million USDT related to a Southeast Asian romance scam.
Industry collaboration between cryptocurrency exchanges, blockchain analysis firms, and law enforcement agencies is proving essential to combating these sophisticated frauds.
In recent years, romance scams (also known as pig butchering) have expanded into criminal enterprises that have caused significant losses to victims around the world. Also known as investment or romance scams, these scammers build relationships with victims through wrong number calls and dating apps in order to "fatten" them and maximize their profits. Once they gain their trust, they lure them into fake investment opportunities, such as cryptocurrencies, before eventually cutting ties.
Sadly, in addition to the victims who fall prey to these scams, criminal organizations also lure other victims with false offers, imprison them in walled facilities, and force them to work to carry out the scams.
In November 2023, stablecoin issuer Tether and centralized exchange OKX, working with the US Department of Justice (DOJ), announced an investigation in which Tether froze approximately 225 million USDT . These funds were linked to an international human trafficking ring in Southeast Asia and linked to romance scams. Furthermore, in June of this year, the US Secret Service, with the authorization of a judge, actually seized and burned these funds, making it the largest seizure in the history of the US Secret Service .
"Unlike other cryptocurrencies like Ether and Bitcoin, Tether has the technical ability to freeze known illicit funds," said Tether CEO Paolo Ardoino. "We work with law enforcement agencies around the world to freeze funds associated with romance scams and all other illicit activity, ultimately providing redress to victims."
Last year, Chainalysis, OKX, Binance, and Tether investigated another case, which ultimately led to Tether coordinating with authorities in the APAC region to freeze approximately 50 million USDT. Let's take a look at the investigation process.
Blockchain analysis tracks nearly 50 million USDT fraudulent funds
Leveraging Chainalysis' Crypto Investigations Solution , the team identified addresses associated with a Southeast Asian romance scam. From there, they narrowed it down to five wallets housing fraud proceeds. The Reactor graph below shows the 19 addresses involved in the investigation. While hundreds of wallets are believed to be sending fraudulent funds, this graph only visualizes transfers from eight victims.
As shown by the diamond pattern in the center of the graph, between November 2022 and July 2023, eight victims made multiple transfers to eight wallets controlled by the scammers. Some victims made multiple transfers within a month, while others made transfers over a period of two to seven months. After the funds were transferred, the scammers aggregated the proceeds into a central wallet (Scam Wallet 10), from which they transferred 46.9 million USDT to three intermediate addresses. The funds were then dispersed across five wallets.
In this type of scam, perpetrators often return small amounts to victims to make the investment appear more realistic. The blue line in the graph above shows the 63,900 USDT returned from Scam Wallet 5 to the victim. The cryptocurrency exchange then coordinated with local law enforcement.
"Our collaboration with these organizations demonstrates the vital need for public-private partnerships to disrupt criminal activity and bring relief to victims," said Erin Fracolli, Head of Global Intelligence and Investigations at Binance. "Strengthening security across the blockchain ecosystem is a top priority, and we work with law enforcement, government agencies, and other exchanges to quickly share our knowledge and expertise to help prevent the spread of crime."
The results of the investigation were shared with law enforcement agencies in the APAC region, and in June 2024, Tether froze the funds at the direction of the authorities.
"When we look at these scams, we don't understand why the victims fall for them and they often blame themselves, but the reality is it's not about intelligence, it's about vulnerabilities and the perpetrators are very good at identifying them," said a senior investigator from the OKX Special Investigations Team.
According to OKX investigator, romance scams originally started targeting victims in Asia, but have now spread globally. He believes solutions like Chainalysis Crypto Investigations are essential for explaining criminal cases to all parties who have an impact on victim relief, including executives, law enforcement, judges, and lawyers.
Building a Stronger Defense: The Impact of Industry Collaboration
Combating sophisticated crimes such as romance scams requires collaboration among multiple stakeholders, with private companies serving as key partners in investigation and prevention. As demonstrated by the success of freezing tens of millions of dollars in illicit funds, collaboration between cryptocurrency exchanges, stablecoin issuers, blockchain analysis companies, and law enforcement agencies is a powerful defense against organized crime.
Our Crypto Investigations Solution supports our partners in all stages of cryptocurrency fraud investigations, from uncovering leads through blockchain analysis, to analyzing fund flows and wallet relationships, to preventing the spread of criminal activity. Our strategic partnership with the Global Anti-Scam Organization further strengthens our intelligence sharing and investigative capabilities.
As fraudsters' tactics evolve and the impact of these attacks grows worldwide, this public-private partnership is becoming increasingly important. By combining trusted blockchain intelligence, cutting-edge technology, and expert knowledge, we aim to protect vulnerable individuals and build a safer cryptocurrency ecosystem.
To learn more about how Chainalysis can help your company fight fraud, contact us .
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The post Chainalysis/OKX/Tether/Binance Collaborate to Help Law Enforcement Agencies in Asia Freeze $47 Million in Romance Scam-Related Funds appeared first on Chainalysis .
