Four US citizens have been charged with participating in an illegal scheme that netted them more than $80 million through cryptocurrency investment scams.
The defendants – Lu Zhang, 36, of Alhambra, California; Justin Walker, 31, of Cypress, California; Joseph Wong, 32, Rosemead, California; and Hailong Zhu, 40, of Naperville, Illinois – are charged with conspiracy to commit money laundering, concealing money laundering and international money laundering.
The U.S. The Department of Justice (DoJ), which announced the arrests of both Zhang and Walker in connection with the fraudulent operation, said the quartet opened shell companies and bank accounts to carry out pig butchering scams, transferring the ill-gotten funds to domestic and international financial entities.
If convicted, Zhang and Walker face a maximum sentence of 20 years in prison. His alleged co-conspirators remain at large.
“The overall fraud scheme in the related pig-butcher syndicate involved at least 284 transactions and resulted in victims losing more than $80 million,” the DOJ said. “Over $20 million in victim funds were deposited directly into bank accounts linked to the defendants.”
The enforcement action comes as a Nigerian national named Eze Harrison Arinze was sentenced to three years in prison for his role in conducting pig butchering scams and defrauding 34 victims in 13 countries, leading to $592,000 in losses.
Late last month, the U.S. DoJ also announced the seizure of nearly $9 million worth of Tether that were traced to cryptocurrency addresses allegedly associated with a Southeast Asia based organization that exploited over 70 victims through pig butchering scams.
Pig butchering falls under the category of so-called romance-investment scams, wherein people are targeted via dating apps under fictitious identities to gain their trust and dupe them into investing their money in seemingly legitimate and profitable ventures, typically promising high investment returns within a short span of time.
“After convincing the victim to invest, the scammers collect the funds, often using digital payment platforms or cryptocurrencies to make tracking more difficult,” Trend Micro said in a report detailing the scam.
“Once they have received a substantial sum from their victims, or once the victims try to withdraw funds from the account, the scammers will suddenly become unreachable, or the brokerage platform will have trouble transferring funds. Scammers could also delete their online presence or create new identities, making it difficult for victims to recover their lost funds.”
One of the emerging trends in this area involves the use of group chats, which shows that cyber criminals are adopting and refining their strategies to make them more effective.
In these cases, prospective victims are added to a fake investment chat group under their control. Should the target express interest in investing in cryptocurrencies, the conversation is moved to a one-to-one chat, where they are introduced to a bogus brokerage platform and persuaded to transfer their funds to the service.
Cryptocurrency investment scams have caused unprecedented total losses of $2.57 billion in 2022, registering an increase of 183% from 2021, according to the Federal Bureau of Investigation (FBI) Internet Crime Complaint Center (IC3) report.
“A significant portion of these phone numbers can be traced to a leaked database containing personal information,” the cybersecurity firm said. “More than half of the numbers added to fake group chats were found in such databases, indicating that scammers can use the leaked information to find their next victims.”