A Guide to Understanding and Reporting Pig Butchering Scams

This guide provides crucial information about pig butchering scams, a new type of fraud that combines elements of romance and investment deception. With an alarming increase in these scams, it’s crucial to understand how they work and the impact they have. 

We’ll cover the basics of pig butchering scams, including how scammers operate and the financial losses they can create. Most importantly, this guide will focus on how victims can report these scams to the U.S. Securities and Exchange Commission (SEC). 

Whether you’ve been affected by this scam or know someone who has, this guide aims to provide clear and useful information on how to report to the SEC and the potential for whistleblower rewards if the case meets certain criteria.

Pig butchering is a type of scam that combines elements of romance and investment fraud. The name is a metaphor: just like a farmer feeds a pig to fatten it up before slaughtering it, the scammer fattens their victim with false promises of “gains” before financially slaughtering them.

Pig butchering scams have caused huge financial losses, particularly in the United States. According to the FBI Internet Crime Report, victims in the U.S. reported losses totaling roughly $2.6 billion in 2022 from pig butchering and other cryptocurrency-related frauds.

This figure was more than double the losses reported in the previous year​​. Additionally, these scams have become more common on dating apps. As of October 2023, around 12% of Americans using dating apps had fallen victim to pig butchering scams, a notable increase from 5% in 2018​​.

Furthermore, these scams have shown a significant increase in reported losses, with a 183% increase from 2021 to 2022, amounting to $2.57 billion. The highest number of reports came from victims aged between 30 and 49​​.

Pig butchering shares similarities with traditional romance scams, in that it has a distinct approach, especially in how the scam unfolds and the ultimate goal of the scammer. 

Below is an overview of how the scam works:

• Contact – the scammer reaches out to the victim, often through social media, dating apps, or messaging services. They may pretend to be interested in a romantic relationship or just a friendship.
  
• Building Trust – over days or weeks, the scammer builds a relationship with the victim. They often seem friendly, charming, and trustworthy. Unlike traditional romance scams that focus mainly on love, “pig butchering” might not always heavily emphasize a romantic connection.
• Introducing Investment – once they have established a rapport, the scammer introduces the idea of an investment opportunity. This could be in stocks, cryptocurrency, or other financial ventures. They make it sound very profitable and safe.
  
• First Investment – the victim is encouraged to make a small investment. The scammer shows them how they’ve supposedly made a profit quickly, which is fake but convincing.
  
• Increasing Investments – gradually, the scammer persuades the victim to invest more money, promising greater returns. The victim, seeing the initial ‘success’, is often willing to invest more.
  
• The ‘Slaughter’ – when the victim has invested a significant amount of money, the scammer disappears, or the investment platform is revealed to be fake. The victim is left with a substantial financial loss.
  
• No Recourse – the victim often has little to no way of getting their money back, as the scammer and the platform used for investments are fraudulent.

The key elements of this scam are the building of trust, the introduction of a too-good-to-be-true investment opportunity, and the gradual increase in the amount of money asked for, leading to a significant financial loss for the victim.

Pig butchering scams can be particularly deceptive because they often start as seemingly harmless interactions. However, there are warning signs and red flags that can help you identify these scams early on. Being aware of these indicators is crucial for prevention.

• Unsolicited Contact – be cautious if someone you don’t know contacts you out of the blue, especially through social media or dating apps. Scammers often initiate contact and may have a well-crafted profile to seem credible.
  
• Rapid Relationship Progression – if a new online acquaintance is quick to develop a close relationship or express strong emotions, it’s a potential red flag. Scammers aim to establish trust and emotional connection rapidly.
• Investment Discussions – be wary if the conversation shifts to financial investments, particularly in cryptocurrency or high-return schemes, after establishing a connection. It’s unusual for genuine romantic or platonic interests to push financial discussions early on.
  
• Too Good to Be True – be skeptical of investment opportunities that promise high returns with little or no risk. Remember, if it sounds too good to be true, it probably is.
• Pressure Tactics – pay attention if you’re being pressured to make quick decisions, especially regarding investments. Scammers often create a sense of urgency to prevent you from thinking critically or seeking advice.
• Secrecy and Isolation – if the person insists on keeping the relationship or investment secret, it’s a red flag. They may also try to isolate you from friends and family who might offer a different perspective.
• Refusal to Meet in Person – scammers usually avoid face-to-face meetings. They may use excuses like being overseas or having a job that prevents them from meeting.
• Request for Money – a definitive red flag is if they ask for money, whether for an investment, a personal emergency, or any other reason.
  
• Changes in Communication Patterns – be alert to changes in the frequency or style of communication, particularly after discussing investments or refusing a request for money.

Preventive Measures:

• Verify Identities – do some research. Check if their social media profiles are genuine and look for inconsistencies.
  
• Seek Second Opinions – talk to friends or family members about your interactions, especially if you’re considering an investment.
  
• Be Cautious with Personal Information – don’t share personal or financial information with someone you’ve only met online.
  
• Professional Advice – if considering an investment, consult with a financial advisor or do thorough independent research.

Being able to recognize these warning signs is the first step in protecting yourself from pig butchering scams. Stay informed and always exercise caution in online interactions, especially when it involves money.

Pig butchering scams are a relatively recent phenomenon, and they might not always fall directly under the SEC’s purview unless they involve securities fraud or violations of federal securities laws. The SEC focuses specifically on the investment fraud component of these scams, particularly when they involve securities or cryptocurrencies.

If you have information about a potential pig butchering scam that involves securities fraud, you might consider contacting an SEC whistleblower attorney who specializes in such matters OR by contacting the SEC directly. Delay in reporting can often lead to more significant losses and reduced chances of any recovery. Remember, you must have an attorney present if you plan on filing a report anonymously.

Here’s how you can report a pig butchering scam to the SEC:

• Gather Information – compile details about the scam, including communications with the scammer, transaction records, and any other pertinent documentation.
• SEC’s Online Tip Form – the SEC has an online Tip, Complaint, and Referral (TCR) system for reporting. You can find this form on the SEC’s official website.
  
• Provide Detailed Information – in the form, describe (or have your attorney) describe the scam in detail. Include how you were approached, the nature of the investment proposition, how the scam was conducted, and any promises or guarantees that were made.
  
• Attach Supporting Documents – if you have any emails, messages, screenshots, transaction receipts, or other documents that support your claim, attach them to your report. If you hire an attorney, they will do this on your behalf.
• Submit the Report – after filling out the form and attaching necessary documents, your attorney (or you) will submit the report to the SEC.

If the financial loss is significant ($1 million or more), we highly recommend consulting with a legal professional for guidance on further actions you can take.

The SEC Whistleblower Program offers monetary awards to eligible individuals who come forward with high-quality, original information that leads to an SEC enforcement action in which over $1,000,000 in sanctions is ordered.

Here are the key points regarding the whistleblower rewards:

• Monetary Threshold – the information provided must lead to a successful SEC enforcement action with monetary sanctions exceeding $1 million.
• Original Information – the information must be original, meaning it’s not already known to the SEC and not derived from publicly available sources.
• Voluntary Submission – the information must be submitted voluntarily, not as a result of a legal request, subpoena, or any other regulatory or legal obligation.
• Percentage of Sanctions – if these conditions are met, the whistleblower may receive an award of between 10% and 30% of the total sanctions collected in the action.
• Confidentiality and Anonymity – whistleblowers can report anonymously if they are represented by an attorney. The SEC also takes measures to protect the confidentiality of whistleblowers.
• Protection Against Retaliation – the Dodd-Frank Act provides robust protection against retaliation for whistleblowers who report securities law violations to the SEC.

It’s important to note that while the SEC Whistleblower Program is a significant avenue for reporting and potentially receiving rewards, not all reports will meet the criteria for an award. The specifics of each case, including the nature of the information and its impact on an SEC enforcement action, play a crucial role in determining eligibility for a reward.

At Kohn, Kohn & Colapinto, we understand the complexity and emotional toll of falling victim to pig butchering scams. We stand ready to support and guide you through the process of reporting these fraudulent activities.

If you think that you’re encountering a pig butchering scam, we urge you to take immediate action. Your prompt response is not just about personal protection; it’s about upholding justice and preventing others from falling prey to similar schemes.

As a firm dedicated to protecting the rights of individuals against fraudulent practices, we encourage you to reach out to us or directly to the SEC to report any suspicious interactions. Together, we can fight to put an end to these deceitful tactics.