The U.S. Department of Justice charged four suspects (two of them already detained) for their alleged involvement in a pig butchering fraud scheme that resulted in more than $80 million in victim losses.
A seven-count indictment on Wednesday linked four suspects, Lu Zhang, Justin Walker, Joseph Wong, all California residents, and Hailong Zhu, an Illinois resident, to charges including conspiracy to commit money laundering, concealment money laundering, and international money laundering.
They allegedly opened multiple shell companies and bank accounts to launder profits obtained from victims of cryptocurrency investment scams (also known as pig butchering or cryptocurrency confidence scams) alongside other fraudulent schemes. The proceeds were transferred to domestic and international financial institutions under their control.
Criminals behind pig butchering scams approach victims via various messaging apps, dating platforms, or social media platforms, build trust, and introduce them to investment schemes that eventually allow them to drain the targets’ cryptocurrency wallets.
Instead of investing the victims’ funds as promised, the fraudsters siphon them to cryptocurrency accounts under their control.
Two of the four suspects, Zhang and Walker, were detained and appeared in a Los Angeles federal court hearing held yesterday. If convicted, both defendants could potentially face a maximum sentence of 20 years imprisonment.
“The overall fraud scheme in the related pig-butchering syndicate involved at least 284 transactions and resulted in more than $80 million in victim losses. More than $20 million in victim funds were directly deposited into bank accounts associated with the defendants,” the Justice Department said today.
The FBI’s 2022 Internet Crime Report showed that investment fraud cost Americans over $3 billion last year.
“In 2022, investment scam losses were the most (common or dollar amount) scheme reported to the IC3. Investment fraud complaints increased from $1.45 billion in 2021 to $3.31 billion in 2022, which is a 127% [increase],” the FBI warned.
“Within those complaints, cryptocurrency investment fraud rose from $907 million in 2021 to $2.57 billion in 2022, an increase of 183%.”
That was not the first warning regarding ‘pig butchering’ scams issued by the U.S. federal law enforcement agency.
In March, it also gave a public service announcement regarding a spike in ‘pig butchering’ crypto investment schemes that led to over $2 billion worth of cryptocurrency lost to fraud in 2022.
Previously, the FBI warned of a rise in scams stealing ever-increasing amounts of cryptocurrency from unsuspicious investors and scammers using fraudulent cryptocurrency investment apps.