Crypto ‘Pig-Butchering’ Scam Escalating Into A National Security Risk— Study
Overview
Recent reports indicate a significant rise in a type of fraud known as “pig-butchering,” where criminals manipulate victims online into fake cryptocurrency investments. This alarming trend has prompted concerns from chain analysts and law enforcement, highlighting the potential national security risks associated with such scams.
What Happened
According to Chainalysis, a substantial amount of money, close to $10 billion, was sent on-chain in 2024 due to crypto scams, with pig-butchering revenue experiencing a nearly 40% year-over-year increase. The number of deposits into these scams surged over 200%, although the average deposit size decreased by approximately 55%. This trend indicates a shift towards a model that targets a larger number of victims contributing smaller amounts, making these operations both lucrative and difficult to trace.
Investigators have found that these scams are not the work of individual fraudsters but are often organized criminal enterprises. Reports reveal that some of these networks employ trafficked workers to manage and communicate with victims, with grooming processes lasting weeks or even months. Research has linked these operations to regions in Southeast Asia, where funds are often moved through concentrated cryptocurrency wallets.
The role of technology in facilitating these scams has also come under scrutiny. Law enforcement officials have noted that generative AI and online service marketplaces are enabling pig-butchering scams to operate more efficiently. AI tools are being utilized to create realistic chatbots, voice clones, and fake profiles, while online marketplaces provide the necessary infrastructure for scammers to develop lifelike investment websites. This technological advancement allows fraud operators to reach and target a broader audience.
In response to the rising threat, authorities have begun to target the infrastructure supporting these scams. The US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Funnull Technology Inc., a Philippines-based firm, for allegedly providing internet infrastructure and tools to fraud networks. Investigations linked Funnull’s services to websites involved in pig-butchering, with US losses tied to these operations reportedly exceeding $200 million.
Additionally, private companies have joined the fight against these scams. In collaboration with law enforcement in the Asia-Pacific region, Chainalysis, along with various exchanges and stablecoin issuers, traced and blocked nearly $47 million in USDT that scammers had consolidated into a few wallets. Previous actions concerning other cases have led to even larger freezes, demonstrating how cooperative efforts within the industry can prevent criminals from converting their crypto gains into fiat currency.
Impact on the Crypto Market
- The increase in pig-butchering scams may undermine investor confidence in cryptocurrency markets.
- Heightened scrutiny from law enforcement could lead to stricter regulations for crypto exchanges and service providers.
- The use of advanced technology by scammers poses an ongoing challenge for authorities in combating fraud.
- The cooperation between private companies and law enforcement may set a precedent for future efforts to mitigate fraud in the crypto space.
- Sanctions targeting infrastructure providers could disrupt the operational capabilities of scam networks.
Updated: 11/15/2025, 9:21:28 AM
