The Journal. - Pig-Butchering: A Texting Scam With a Crypto Twist

Episode Date: November 24, 2023

We’re off today, but we still have a great episode for you. A texting scam that originated in China is on the rise in the United States. It’s more sophisticated than scams of the past, and it has already cost American victims more than $400 million. WSJ’s Robert McMillan explains how pig-butchering works, and one victim shares how it’s impacted her. This episode originally published in November 2022.   Further Reading: -A Text Scam Called ‘Pig Butchering’ Cost Her More Than $1.6 Million  -Online Scams Cost Americans Billions. Here’s How to Avoid the Worst of Them.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, it's Kate. We're off today as part of our Thanksgiving break, but we wanted to remind you of this episode from last year. It's about the rise of a new kind of con that starts with a text. Here it is. Our colleague Robert McMillan covers cybersecurity, and he's been reporting on a growing problem,

texting scams. Maybe you've gotten one. There are these text messages that come from numbers you don't recognize, and usually they try to strike up a conversation. You probably ignore them, but Bob, he doesn't. For the last month or two, every time I get one of these obscure text messages, I respond. And I got a text message on Friday at 4 p.m. I haven't answered it, but I think I should answer it now.

Here, let me read the message to you. Okay. It says, good evening. I hope you had a good and productive day. Long time no see. I have updated my number. How are you doing? You don't recognize the number? No, I don't recognize it. It's a 530 number.

Okay. And what's your reply? I'm going to say, I think you have the wrong number. Do I know you? But I've been doing this for a couple of months, and usually what happens is they send me back a picture right away. And it's usually a young, attractive-looking person. And then they say, I don't know you, but you seem interesting. But the people texting Bob aren't actually interested in him. They're interested in his money.

These texts are part of a new crypto scam. It's sophisticated and it can go on for months. It's called pig butchering. So the problem is if you respond to these messages, they have these scripts they use that are basically designed to entice a certain type of person into a relationship. So when it does work, it's just particularly devastating. It can ruin your life. It can eliminate your life savings. And that's what has happened to a number of people, to thousands of people in the United States over the last year.

And those people have really, they've lost a lot of money because of this. Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbach. Coming up on the show, pig butchering. A devastating texting scam that's costing people millions. Introducing TD Insurance for Business, with customized coverage options for your business. Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Contact a licensed TD Insurance advisor to learn more. Pig butchering starts with a seemingly innocent text message. And once the scammers catch a victim,

they convince them to start investing in crypto. They have the victim set up an account on a fake crypto exchange. And over the course of months, they steal more and more of the victim's money. And why is this called pig butchering? It's a reference to the idea that you're fattening up this fake online account. You think you're making money, so that's the fattening of the pig, right? And then at the point when you actually realize you have been scammed, you're dead to them. You're butchered. And who is behind it? Where are these scammers based? There are a lot of people doing it, but the group that I interviewed for my story,

the Global Anti-Scam Organization, has identified some Asian-based scammers. So they're thought to be run by Chinese individuals who bring scammers into compounds in Laos or, you know, other Asian countries where they sort of work like office jobs, scamming people. Initially, a few years ago, these scams were concentrated on victims in China, but they've, in the last two years, they've expanded and they're hitting the United States right now. How long has it been around?

Well, pig butchering, I mean, the name is new. Yes, it was first coined in Asia, in China, about four years ago, I mean, the name is new. Yes, it was first coined in Asia and China about four years ago, I think. This scam was happening there, but it moved to the United States last year, and it's really taken off this year. Bob says these scamming operations target people who are educated and wealthy. They also look for someone who might be a little lonely. The thing that really got me about it is it just preys on this fundamental human decency

of you get a wrong number and you tell somebody, hey, I'm sorry you made a mistake. And, you know, I'd like to live in a society where you can have serendipitous interactions with strangers and they can lead to friendships. Like that's something that I think is a mark of a healthy society. And that's being abused with the scam. These kinds of scams, where the scammers gain the trust of the victim by building a relationship with them, they have a name. They're called confidence scams. Pig butchering is from that family,

but it has sort of a crypto twist to it. You believe that you're making a lot of money. You believe you're fattening your account, but you're making all this money on a fake crypto exchange on a website that looks like it's a crypto exchange, but it's just a website run by the scammers. So they give you a little account there and you made some initial trades and you look like you're making a lot of money. You're feeling actually smart because you're like, oh, I'm doing the thing that the cool kids do. I'm making money on crypto. That's right. I have this friend who I met online who understands crypto and I'd heard about it. And finally, I'm doing what everyone else is doing, making big money.

Right. And it feels like it preys on this, the fact that many people don't understand crypto and they think, oh, some people became billionaires and maybe I could. Right, and the fact is that cryptocurrency is really an amazing rail for moving money very quickly across borders. It's really good at that. And if you're a scammer in China or in Asia

and you want to get money from people in America, the old techniques were slow and painful. You'd have to convince them to go to a Western union and wire the money. Now you don't have to leave your house. You could do it in your pajamas. You can be swindled for a million dollars in your PJs. So crypto is sort of an essential piece of this new scam. Of the pig butchering, yeah. Yeah. Yeah. So it's that unknown, the fact that if you're going to be involved in cryptocurrency, it's

not that weird that you would go to a website that you've never seen before, right? People aren't buying it at Bank of America or Wells Fargo, you know? So already you're dealing with this world where the names aren't so well-known to everybody, and who's legit and who's not legit, it's just not common knowledge at this point. FBI officials told Bob that in the U.S. last year, pig butchering cost victims more than $400 million.

It's kind of remarkable how far they will go to convince you that they are real people. Like, you may have heard of the Nigerian Prince scam, where you get these clumsily written email messages that you're supposed to, like, respond to in order to, you know, make millions of dollars. This is far beyond that, right? So I think the amount of effort that they're willing to make to sort of convince you that they're real is greater than what a lot of people have been expecting. Coming up, what pig butchering looks like through the eyes of one victim. With Uber Reserve, good things come to those who plan ahead.

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Airmile Jane Yan is in her 50s. She was born in China and now lives in Delaware with her husband. She works as a business analyst at a software company. And in January, she got a text. The first text message was saying, are we going to the salon tonight? And what did you think when you got that?

I think that person got the wrong person. So that I respond, I think you got the wrong person. I don't know who you are. But this random number kept the conversation going. He told her his name was Eric, that he was in Seattle for business and was on his way back to China. He told Jane he had a daughter

there and that his parents were helping take care of her. Jane thought he sounded like just a regular person. And they moved their conversation over to WeChat, a Chinese social media app. After the first day, actually, he greets me daily. Good morning, how are you doing? Even at the beginning, I wasn't really desire to engage the conversation, but I thought he was someone very considerate, very kind, you know. Then the conversation getting to talk about the family, And do you remember when he brought up this investment?

If I remember correctly, it was January the 28th, a week into the conversation. And at the beginning, I just brushed him off because I didn't understand those stuff. I said, oh, I don't understand this, and I didn't want to get into detail, talk about it. Did you have interest in crypto? Not particularly, because I don't really,

I don't do a lot of investment myself. I have some stocks, but I don't have any desire to invest in there. But he said to me, oh, don't worry, I will teach you. I'll walk you every step of the way. And he did. Eric helped Jane open an account on a legitimate crypto exchange, Coinbase. And then he helped her set up another account on what appeared to be a different crypto exchange. But this exchange was actually fake. You know, I had my login. I can go and check my, you know, my account. So, I mean, now I know this is how shady these platforms are. But back then, I thought, well, yeah, I have my own login. How wrong can it be? It's just like another bank account.

In February, Jane put $5,000 into her account and made her first transaction. In three minutes, her investment rose 20% to $6,000. After the first trade, I was shocked. I was like, wow, you can make money that way, really? And of course, he has an uncle that was giving us the inside information. And I was so appreciative. I was like, wow, I see you share

this inside information with me. And I was so appreciative. I was like, wow, I see you share this inside information with me. And I say, thank you. Right. Did you talk to your family about it? No, I didn't. Also, he told me not to tell anybody. He said, don't tell anybody about investment. People would think that's lies. And he said, this inside information, I cannot tell anybody else. Jane was convinced that this was a safe bet. She could check her investments just like any other bank account, and she could see her money was growing. So in March, Jane went in big. She put $400,000 into the account.

Jane said Eric offered to go in on the investment with her and put $100,000 more into her account. And that didn't strike you as strange at the time. No, actually, I thought, wow, she's so nice. Why was, you know, I'm like, you sure? He said, yeah. He said, let's make money together so we can go travel together. And where was your money coming from, $400,000?

I took out from our savings checking account and about $250,000 of them coming from my inheritance RA that my godmother left me. Again, Jane watched the money grow. But then she got an odd message. She was told she made a mistake and her account was locked. To unlock her account, Jane was asked to invest more money. I did have one moment of questioning. I was like, that doesn't sound right, to need additional more money, unlock the account. And then he said to me, well, that's the way how they operate. That's the way how crypto operates.

Jane says Eric told her to reach out to customer service. Customer service told her she would need to match the money in her account to unlock it. Another $600,000. That customer service, of course, was not real. But it felt real to Jane. And it gave her the confidence to keep investing. I had asked my husband for his retirement

account. And I told him well, I didn't tell him the truth. I told him, I say if I don't put this money in I will lose all my other investment. And he, the scammer basically said to me, you can just borrow. We'll put in, you can take it right out, and then we can pay him back right away.

So at the time, my mind was thinking, I'm just borrowing it, and I can pay him back right away. All right, so you put in another $600,000. You have $1.2 million in this fake account. What happens from there? Well, we did more trades. And actually we did three or four trades. I don't quite remember. But so the last trade when we done,

and I had $3.6 million in that account. Wow. Yeah. And are you making plans for this money in your head? Yeah, I was like, oh, great. I can take the money out. I can pay my husband back. You know, I want to put back my,

whatever the initial investment I'm taking out, I want to put them all back. And in the fall comes my kids, the tuition's all set. You know, they have four more years each. So I was like, okay, my son can, you know, go any university he wants to. And then I was just thinking my husband, like, writes music. He helped me, you know, he helped me and he did me a favor. And I can, you know, give him extra money

for him promoting his music, you know. So I was making plans in my head with that money. But before she could withdraw the money from her account, the fake crypto exchange told her she'd have to pay taxes on her gains. And so she scraped up the money to do that. But then she was told she had another charge. Now that is the day I felt very uncomfortable and nervous.

And the next day I report to the police. What did that moment feel like when you realized something was wrong? I was very scared. You know, I actually felt numbed. I didn't know it was this kind of crime at that moment either. And I just felt something's wrong. And I talked to the police and the police basically told me,

this kind of scam happens every day. I'm like, what is scam? And I had to go online to search what is scam because I had no idea what a scam it was. I think the first two weeks, I didn't have the time to realize that the damage done to us. But I was more at going at how can I resolve this problem? How can I find someone to help us? Because you had been duped.

You believed that this platform was legitimate. Yes. Yes. You didn't understand the connection between these two things and that it was all part of one racket. Exactly. Exactly. How did you tell your husband? So I basically had a conversation with him, and I told him the story. I even offered him a divorce because since I lost all his retirement, I still have some of mine in my account, and I offered him.

I said, if you want to take, you can take mine. You can take mine. And, you know. But he was shocked. But he refused divorce. Actually, just through this whole time, he was very supportive. And there are moments I want to cry. And my heart just breaking. My anxiety was high. In the end, Jane lost $1.6 million. She says law enforcement told her

there's little they can do to get her money back. How are you doing now? It's been six months now. I'm doing a little better than before. My anxiety level is still high. I wake middle of the night and my heart aches. It's just pain there. Even though I try to say nothing about it,

I try to say I'm going to be moving forward, but the thoughts are still there. I feel it's very painful. Very painful. We worked very, very hard our whole life and saved you know I'm not a luxury person I don't have anything luxury you know my husband has clothes where 10-15 years has a hose on a rope rip on it he's still wearing it it's not we can't afford it, we just, you know, it's a necessity, what's needed, what you wanted. But we saved for our life just hoping we have a secure future.

You know, not handing over to a criminal like that. Law enforcement officials say if you get a shady text, you should ignore it. And don't transfer money online to someone you've never met. If you've been targeted by a scam, you can report it to the FBI. Go to the website ic3.gov. This episode was originally published in November 2022. The Journal is a co-production of Spotify and The Wall Street Journal. Thanks for listening. See you Monday.