Blockchain forensics expert has doubts over $75B ‘pig butchering’ report

By admin On Мар 12, 2024

protos.com 6 h

Academics at the University of Texas claim to have traced over $75 billion of crypto flows linked to social engineering scams known as ‘pig butchering.’

However, blockchain forensics expert Taylor Monahan suspects that this figure is inflated by “a few orders of magnitude.”

Metamask’s Monahan, a longstanding figure in the crypto community known for her recent painstaking on-chain tracing of the Lazarus Group, has specifically raised concerns over the study’s methodology.

I keep getting sent this paper on Pig Butchering and, yes, I’ve read it numerous times now.

The finer details and some of the tracing methodology within are…okay.

But the big takeaways—and especially the $75.3 billion dollar number—are fully fucking absurd. 😅 pic.twitter.com/8klgC3B8bc

— Tay 💖 (@tayvano_) March 11, 2024

Monahan suspects that the authors have double-counted funds and misinterpreted some of the addresses involved, such as a decentralized exchange, OTC desks, and brokers who service the scammers.

One of Monahan’s key criticisms is that, despite the authors noting the possibility of double-counting recirculated funds, they summed all inflows to end-point addresses, an approach characterized as ‘charging on anyways.’

Compared to previous studies, the $75 billion total appears extremely high. Blockchain forensics and compliance firm Chainalysis, for example, puts the total at $1 billion, noting that “the true total is likely higher.” However, such a discrepancy between estimates seems unfeasible.

One key trend covered in our Crypto Crime Report: The intersection of approval phishing and romance scamming (sometimes known as “pig butchering”). We tracked over $1B in victim losses to these scams from 2021-2023, but the true number is likely higher. https://t.co/5cRD7VgNrN pic.twitter.com/8sk4GwluZz

— Chainalysis (@chainalysis) March 7, 2024

Totals aside, the pig butchering industry is a big, and horrifying, problem.

What is ‘pig butchering’?

Pig butchering, from the Chinese 杀猪盘, is the name given to a class of online social engineering scams that lure in victims via dating apps or social media. Payments are then extracted from victims by leveraging a supposed romantic relationship, or through the promise of lucrative investment opportunities.

Those conducting the scams are often themselves victims of organized crime, enslaved in so-called ‘scam farm’ compounds across Southeast Asia, particularly Myanmar.

Monahan urges more caution in studying the intersection between slavery and crypto, recommending a UN report from last year.

Ineffective controls

Those in charge of moving the proceeds of pig butchering scams are unfazed by the controls that centralized exchanges and stablecoins are meant to have in place.

The paper states that “perpetrators interact freely with major crypto exchanges” such as Binance, Huobi, and OKX, evidently bypassing any effective know-your-customer (KYC) controls.

The scammers are also clearly unafraid of using USDT, the stablecoin which the report identifies as 84% of the volume studied, despite Tether’s ability to freeze any funds tied to illicit activity.

As the paper’s abstract states: “Our findings highlight how the ‘reputable’ crypto industry provides the common gateways and exit points for massive amounts of criminal capital flows.”

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