TL;DR
- Investors lost $5.6 billion to cryptocurrency-related fraud in 2023, a 45% increase from the previous year.
- Investment fraud, known as “pig butchering,” was the most common and costly, with losses of $4 billion.
- Many scammers are linked to human trafficking networks in Southeast Asia, forced to participate in these fraudulent schemes.
In 2023, cryptocurrency-related financial frauds hit an all-time high, with losses exceeding $5.6 billion, an increase of 45% compared to 2022, according to a recent report from the FBI’s Internet Crime Complaint Center (IC3).
Although cryptocurrency scams accounted for only 10% of financial fraud reports, they accounted for almost half of total losses.
Investment fraud was the most widespread and damaging, racking up more than $4 billion in losses.
This type of scam, also known as “pig butchering,” has been especially devastating for investors.
Pig butchering schemes involve scammers building trusting relationships with their victims over time, usually via messaging apps, before convincing them to invest large sums of money into fraudulent cryptocurrency platforms, from which they cannot withdraw their funds.
According to the FBI report, many victims have incurred huge debts to cover losses resulting from these false investments.
Although people between the ages of 30 and 49 filed the most complaints related to investment fraud, it was those over 60 who suffered the greatest losses, totaling $1.24 billion last year.
The report also reveals that 83% of cryptocurrency-related fraud complaints came from US investors, with California being the worst hit state with over 9,500 complaints and $1.2 billion in losses.
Link between cryptocurrency scams and human trafficking
An even more alarming aspect of these frauds is the connection to human trafficking networks.
A 2022 investigation by ProPublica, later replicated by the United Nations, found that many of the scammers carrying out these frauds are actually victims of human trafficking in Southeast Asia.
These individuals are held in “scam compounds” and forced to work on fraudulent operations under threats and intimidation.
The FBI report includes a warning to U.S. citizens about the risks of accepting fake job offers abroad, especially in Asia, as many of these offers are linked to human trafficking.
Victims of these schemes are often forced to pay for their own travel expenses, leaving them in debt before they arrive, and then forced to work to pay off those debts while trying to cover additional housing and living costs.
Traffickers use these mounting debts and fear of local authorities to maintain control over workers, who are in some cases sold or moved between different compounds, further exacerbating their vulnerable situation.
