Alabama investors are the latest to fall victim to so-called pig-butchering investment schemes that state securities regulators say are becoming an increasing threat.
The Alabama Securities Commission announced Friday that it had issued a cease-and-desist order against two fake cryptocurrency websites and their creators, James Yeh and Kenju Go. The Alabama regulator said the men had duped investors into depositing funds into accounts on their sites after tricking them into believing the operations were legitimate.
The scammers used a technique regulators call pig butchering. A scammer contacted an Alabama investor initially through a dating website and then continued the conversation on WhatsApp, delving into the investor’s finances, the Alabama regulator said.
Over the course of the scam, the investor deposited $725,000 into an account on one fake crypto website — BATCNAP — and then to another — BATCIPE — when the initial site became inoperable. The investor was told that the investment had grown to $7.5 million. But a withdrawal request was answered with a message that the investor owed $775,000 in personal income tax and had to make more cryptocurrency deposits.
Alabama investigators found that Yeh and Go created 948 websites and left a trail of 88 victims nationwide who lost more than $22.5 million.
Yeh and Go are likely operating under fake names. They were given 28 days to respond to the order, Alabama securities officials said. Neither they nor their lawyers have come forward..
Regulators have been amplifying their warnings about pig butchering, which is rising on the list of investor threats compiled by the North American Securities Administrators Association.
Pig butchering often starts with a romantic overture with the fraudster using an attractive fake profile picture on a dating site or another social media platform. Once someone responds, the scam begins in earnest with chats that eventually get around to get-rich investment schemes.
The investor can usually make small withdrawal initially, which is the scammer’s way of building trust with the target, Alabama Securities Commission Director Amanda Senn said in an interview. That’s the fattening part of the pig-butchering approach.
“They give the victim a false sense of security on the investment, and they go in for the kill on the larger sum,” Senn said.
Elderly investors often are targeted in pig-butchering, a trend that started during the coronavirus pandemic when most people were spending much more time than usual online.
Alabama investment advisors have been “critically important” in identifying pig-butchering rip-off schemes by contacting regulators when clients request to withdraw large sums of money or engage in other unusual client activity, Senn said.
Advisors can place a hold on withdrawals under a NASAA model rule that has been approved in Alabama and other states.
“They’re our first line of defense,” Senn said of advisors. “They’re interfacing directly with the victims.”
Federal prosecutors say the scheme used fake investment accounts and a fictitious financial advisor to lure victims into romance-fueled fraud.
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