Crypto 'pig butchering' scam wrecks bank, sends ex-CEO to prison for 24 years

https://www.cnbc.com/2024/08/21/cryptocurrency-shan-hanes-pig-butchering-scam.html

by pseudolus • 2 years ago

111 110 2 years ago

pbohun• 2 years ago

Something I don't understand is why don't any scammers ever go to prison? For example, people like Logan Paul have run multiple scams now and have had zero repercussions (except making loads of money off of naive people). Is scamming legal?

taeric• 2 years ago

This article makes it sound like they would go after them if they knew who they were? I don't know what scams Logan Paul has done, but I'd imagine if they can get him on something that they will?

Exoristos• 2 years ago

In the big picture, it really depends whom you're scamming.

voxic11• 2 years ago

You just have to keep passing the blame, Logan Paul claims he didn't intend to scam people and was himself scammed by the developers he hired and that is why his project never materialized.

The difference between running a scam and running a failing business is just a matter of intent, which is hard to prove.

shkkmo• 2 years ago

The difference between running a scam and running a failing business is just a matter of intent

Perhaps in some cases but "running a failing business" becomes fraud when you start lying, even if your intentions are "good".

cellis• 2 years ago

Scammers go to prison all. the. time. Just search news for "Fraud conviction".

yieldcrv4• 2 years ago

Its a case by case thing

People like this ex CEO go to prison all the time. Stateside scammers misrepresenting why they’re getting their victim to wire things go to prison all the time.

In this case its not proven that anyone knows who the scammers are, or where they are. Its just as likely that they are pig butchering the bank account owners in those other countries too.

Now, Logan Paul? You have to also realize when some communities use the word scam far too liberally. Naive people losing money trying to flip something thats not an investment, and failing, doesn't make it a scam involving any legal sanction. Even if it was an investment, properly registered, that just protects the promoter even more.

ffsm8• 2 years ago

You have to also realize when some communities use the word scam far too liberally.

That's true! People are calling an overpriced garbage dlc a scam nowadays, and that's just not true. It's exactly what it says on the label, so it's definitely not a scam, unless the marketing was very disingenuous.

But what Logan Paul did is not an example of that. It was not an investment that didn't pan out. It was an orchestrated pump and dumb scheme that was centered around a product, which he never delivered on.

You'd have grounds to argue if the game was delivered - but as it stands you cannot call that anything but a scam

bagels2• 2 years ago

A lot of the scams originate in other countries. Convincing them to prosecute on behalf of a foreign victim is difficult.

no_wizard5• 2 years ago

I am very glad he was found out and investigated by authorities ultimately leading to this, but reading the article I can’t help but wonder:

It’s interesting that this one guy gets 24 years over 47 million dollars. Yet, not a single executive, board member, VP or SVP got arrested for the fraud that lead to the 2008 crash. We are talking orders of magnitude more than this and they declined to prosecute even though the evidence was absolutely abundant as we now know.

This guy doesn’t deserve any sympathy but it should be known that he’s hardly the most egregious financial criminal walking the streets. That honor goes to Jamie Dimon of JP Morgan Chase.

edit: at the very least, they should have fired all the executives from the banks, and their boards, and stripped them of their compensation packages, and clawed back anything they earned in that time period, and banning them for life from working in the financial sector in any capacity ever again. That would have been more appropriate than jail time and sent an actual message to Wall Street that this behavior won't be tolerated.

MattGaiser2• 2 years ago

It’s not clear to me in 2008 that anyone committed fraud to the level required.

My understanding was more that things were disclosed deep in the fine print, and nobody really verified anything and didn’t have a legal obligation to do so.

Who allegedly lied to the point of it being fraud in 2008?

no_wizard5• 2 years ago

See my comment to a similar question that I answered already a few comments up from this one. If more information is desired, let me know, I have mountains of it, this is just the highlights to show in broad strokes the banks did indeed know they had fraudulent loans and they willingly misrepresented them.

fortran772• 2 years ago

Well, the people who lied on their mortgage applications to get loans they couldn't possibly every pay back certainly committed fraud. Nobody went to jail. Neither did anyone of the 100,000 or so people who collected the "first time homebuyers tax credit" fraudulently.

johngalt• 2 years ago

What sort of fraud in 2008 would be similar to just wiring millions of dollars out of the bank to a personal investment/scam?

The most egregious stuff in 2008 was mispricing MBSs. Incorrectly pricing risk is pretty far from stealing money from investors/depositors.

rib3ye2• 2 years ago

Well, there were the thousands of fraudulent NINJA loans made by individual applicants who lied.

But then you have to ask if the institutions doing the application verifications were criminally negligent.

vlovich1234• 2 years ago

I mean they they were bribing/manipulating/forcing the ratings agencies to misclassify derivatives. That’s basically stealing except with more steps.

no_wizard5• 2 years ago

They paid $13 billion in fines for their role in underwriting fraudulent securities[0][1] as it was coming to light. In a brief that was never filed as part of the settlement (JP Morgan Chase really didn't want this to be filed and made it a contingency for the settlement), made public after the settlement and summarized in the statement of fact released along side the settlement itself[2], the government had enough evidence that it was going to file a lawsuit, the core of which was related to this:

for a fraudulent and deceptive scheme to package and sell residential mortgage-backed securities that the bank knew contained a material amount of materially defective loans.

If that's not enough, if we want to look just beyond 2008, they pulled a scam to manipulate the part of the settlement which was suppose to 4 billion in loan relief for home owners[3] by forgiving phony mortgages.

I have more, if so desired, but I didn't want this to turn into a hundred link dump of information that would be very dense to read.

[0] https://www.vanityfair.com/news/2017/09/jamie-dimon-billion-...

[1] https://www.thenation.com/article/archive/jamie-dimons-13-bi...

[2] https://www.justice.gov/iso/opa/resources/943201311191510319...

[3] https://billmoyers.com/story/special-investigation-americas-...

StanislavPetrov• 2 years ago

Robosigning, directing employees to sign fake names on contracts and repeatedly submitting fraudulent statements to the courts, among other things, in a largely successful effort to steal people's homes on a mass scale.

Reuters has found that some of the biggest U.S. banks and other "loan servicers" continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.
In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts. Reuters also identified at least six "robo-signers," individuals who in recent months have each signed thousands of mortgage assignments -- legal documents which pinpoint ownership of a property. These same individuals have been identified -- in depositions, court testimony or court rulings -- as previously having signed vast numbers of foreclosure documents that they never read or checked.

https://www.reuters.com/article/world/special-report-banks-s...

User232• 2 years ago

Here[1] is a write up from an expert. It falls into the class of accounting control frauds.

[1] https://fcic-static.law.stanford.edu/cdn_media/fcic-testimon...

chollida12• 2 years ago

It’s interesting that this one guy gets 24 years over 47 million dollars. Yet, not a single executive, board member, VP or SVP got arrested for the fraud that lead to the 2008 crash. We are talking orders of magnitude more than this and they declined to prosecute even though the evidence was absolutely abundant as we now know.

Can you show the abundant evidence that is available, and who committed the crimes you think they did and which specific crimes you think these individuals committed?

no_wizard5• 2 years ago

I replied to someone above with a similar question. And that is only the tip of the iceberg of relevant information I have on hand. If more is desired, please ask what you'd like.

readthenotes12• 2 years ago

If I recall correctly, the attorney general at the time (Eric Holder) told his peeps not to bring a case unless it was absolutely 110% rock solid. It was too much bother for them.

no_wizard5• 2 years ago

What seemingly happened is they used it to leverage a settlement out of the banks[0] as part of the negotiated settlement that landed in 2013 was the explicit removal of a brief that was to be filed to carry out a lawsuit of this nature.

I wish I knew why they decided not to pursue such a rock solid case, but by 2013 it seems they reversed course on being 'hardline' in dealing with the banks.

This still doesn't excuse the fact the executives and board weren't held criminally liable, or at the very least all fired and banned from ever working in any part of the financial sector ever again, and stripped of their golden parachutes and money clawed back that they made during the time period.

[0] https://www.vanityfair.com/news/2017/09/jamie-dimon-billion-...

yieldcrv4• 2 years ago

the main difference is that Embezzlement doesnt come with the option of a civil settlement by a completely different enforcement agency, and also isnt hard to prove

fortran772• 2 years ago

VP or SVP got arrested for the fraud that lead to the 2008 crash. We are talking orders of magnitude more than this and they declined to prosecute even though the evidence was absolutely abundant as we now know.

Nor did any of the millions of Americans who lied on mortgage applications, and took out mortgages they couldn't possibly afford to pay back. Nor was anyone ever held liable for income tax on forgiven debt or the imputed income from living rent-free in houses for years until the court foreclosed.

roshankhan28• 2 years ago

would you say this would be something similar to the FTX crypto scam?

wavemode3• 2 years ago

Whenever I hear the term "pig butchering scam" I struggle to distinguish it from the plain term "scam". Like, as far as I can tell it is simply called "pig butchering" because of the imagery of fattening a pig before slaughtering it. But I feel like in the past we would normally just call it a "long con", perhaps.

This sort of thing has existed for a long time, but this term makes it sound like something that is new or novel. Feels like the media is doing a bit of... "headline engineering", here.

TillE• 2 years ago

Yeah the scam itself is not meaningfully distinguishable from eg the good old Nigerian Prince emails.

But the distinctive characteristic of the new model is to operate at large scale with human trafficking.

drwl2• 2 years ago

yeah I'm with you there. Pig butchering scam [1] is just a simple con, not sure why they're attributing any importance to the name of it

[1] https://en.wikipedia.org/wiki/Pig_butchering_scam

wcarss• 2 years ago

evocative imagery gets clicks

jcrawfordor• 2 years ago

the term "pig butchering" originates in Chinese (杀猪盘), where this particular style of scam is often targeted at overseas people via WhatsApp. So "pig butchering" refers specifically to these scams run from China (or elsewhere in the region by Chinese operations), and it's what the scammers themselves call it. One of the distinguishing features is that they're often run by fairly large, organized operations with paid, trafficked, or otherwise long-term staff manning the WhatsApp personas. Similar to Indian call center scams.

Much like how "419" or "Nigerian prince" refers to scams coming out of a specific region.

deaddodo2• 2 years ago

Much like how "419" or "Nigerian prince" refers to scams coming out of a specific region.

419 refers more to a type of scam than a region. In some ways, it's almost synonymous with "online scam" these days.

The name simply originates with Nigeria, and continues to associate with it due to the sheer scale of online scams coming out of the region.

kccqzy• 2 years ago

I still don't get it. Is pig butchering a common phrase in Chinese to refer to scams? I believe the phrase, even in its original Chinese language, was only invented recently (Wikipedia says 2016). That doesn't answer the question of why this particular phrase was invented.

victorbjorklund2• 2 years ago

I always thought it was because they are looking for big victims loosing a lot (fattning up the pig and then butchering it) vs scams stealing small amounts from a lot of people.

jiggawatts• 2 years ago

Pig butchering is not just something that goes on in an abattoir, in many countries it's like a mini-festival. The idea is that in winter months each household butchers their pig, everyone turns up and gets fed. Then next week it's someone else's turn in the village to butcher their pig. Before refrigeration this was a great way to have meat regularly without needing to preserve all of it.

The image that this evokes in the minds of people that have experienced this is a big barbecue where various cuts of meat are feasted upon for a long time, maybe all day. It's a joyous event of unbridled gluttony. The guests must consume all of the un-preservable meat right away, which means if you attend one of these events you get to stuff your face with delicious, delicious pork for several meals, not just one.

To understand the origin of the "pig butchering" scam name, consider that most scams are one-offs. The scammer tricks the victim, the victim loses maybe a few thousand dollars, and learns "not to do that again". With pig butchering, the victim is tricked into feeding their money repeatedly into a fake "investment" application, which allows the scammer to "feast" on them for a long time, like at a pig butchering event.

Similarly, many long-cons take time to set up, but are still one-off thefts. That's not the same as convincing someone to repeatedly put thousands of dollars into the stealing machine.

vsuperpower2021• 2 years ago

This still doesn't make sense. The connection between "feasting all day on a pig" and what you've described is non-existent.

norgie• 2 years ago

Come on, I think you're just looking for things to get upset about (and not engaging with the content in any meaningful way).

Assigning specific (and colorful) names to scams/cons has always been a thing. See

- Pig in a poke https://en.wikipedia.org/wiki/Pig_in_a_poke

- Spanish prisoner https://en.wikipedia.org/wiki/Spanish_Prisoner

- Badger game https://en.wikipedia.org/wiki/Badger_game

- Coin smack https://en.wikipedia.org/wiki/Coin-matching_game

- Pigeon drop https://en.wikipedia.org/wiki/Pigeon_drop

And anyway, the name seems to come from the scammers themselves in China, so I don't know why the media would be to blame.

wavemode3• 2 years ago

I'm not upset, and I don't think your examples are analogous, since they all do have a specific meaning beyond "scam".

I think both things can be true - the term originated from Chinese and became a common term in that region for long conning people over the internet, sure. But, at the same time, the media has also latched onto its use largely for dramatic effect, even when there is no evidence the scammers are Chinese.

drwl2• 2 years ago

I don’t think that’s fair to say the person is not engaging content in a meaningful way. Have you read the article? It’s pretty clean cut aside from understanding who the perpetrators were. The ceo of a bank got conned and went to prison, and there’s emphasis on calling the con a “pig butchering scam”

wyldfire• 2 years ago

Absent the etymology described in this thread, I would have had a similar confusion to theirs as to what distinguishes this scam. But now I know it's a regional term for it and I shouldn't necessarily expect a term with an obvious connection to how the scheme works.

listenallyall• 2 years ago

This sort of thing has existed for a long time

Not to this scale, level of sophistication, global reach, ease of finding victims and the scammers being victims (of human trafficking) themselves. Using crypto, human trafficking to force people to contact victims nonstop, having scripts and actors, legitimate-looking websites showing fake profits is new and novel.

Now add AI into the mix, along with large-scale data breaches - would not be surprised if, by 2030, the majority of individuals over 60-70 years old are contacted by at least one very convincing scammer that the victim will have difficulty distinguishing from an actual family member. It's already happening - only a matter of time before it's more widespread.

rcxdude• 2 years ago

I think it's easy to think that the name is somehow descriptive of the mechanics of the scam (which tends to be how scams are named). But in this case it's more about the payout patterns. It is usually a relationship/investment scam, i.e. one where the victim is conned into believing they've formed a close relationship with a wealthy individual, who then offers them investment advice, pointing them towards a fake investment app.

anonylizard• 2 years ago

Its very very good to name these scams with strong language.

It reminds of people to not be the 'pig' to be butchered, to know that their greed or lust could be manipulated by an organization behind that screen, and that they are a pig walking into a slaughterhouse willingly.

username135• 2 years ago

Its nothing more than marketing/rebranding. Capitalism bby! Gotta get those clicks!

somat• 2 years ago

I always thought the euphemism "pig butchering" referred specifically to the case where a government kills a company via persecution in order to gain the wealth contained within. sort of in the sense "you let your pigs(private industary) get fat and wealthy. and when times get tough, you can butcher(fines, taxes, regulation and persecution) one of them to eat well for a while." usually seen in the context of chineese companys

canjobear• 2 years ago

Pig butchering scams are characterized by some number of the following:

- Finding marks by sending out text messages which have the appearance of being a normal message sent to the wrong number, and which invite a response.

- Building a long-term relationship with the mark over text messages.

- Eventually convincing the mark to invest in a fake crypto exchange.

- The fake crypto exchange delivers small wins for a while

- Eventually convincing the mark to make a very large investment.

- Then the money disappears.

- The scam is run by Chinese operators in an illegal call center in Myanmar using human-trafficked labor.

This obviously has characteristics that distinguish it from a generic scam.

Example of a scam that is not pig butchering:

- I got a text message offering me $XYZ/day to drive around town with a Colgate toothpaste ad on my car

- If I had accepted the offer, they would have asked me to send in a downpayment for the ad materials, then they would have vanished

meowster• 2 years ago

A new scam that I'm seeing is random text messages where the other person thinks you're a veterinarian, or play tennis (and they're oddly worded):

Hello Manny. My customized tennis racket has arrived. I want to play a tennis match with you. I have a hunch that you are no longer my opponent. When do you have time?

I imagine they want to get you into a conversation and pitch a crypto scam.

jrochkind12• 2 years ago

That you can be successful CEO of a bank for many years and still a complete idiot around financial investments or transactions... I'm not sure what it says about CEOs of banks.

“He said, ‘Brian, I’ve got this money and it’s in cryptocurrency, and I need $12 million to help verify the funds.’

What?

silisili• 2 years ago

This was the line that got me also. Did he not realize how stupid the words coming out of his mouth sounded?

I've heard that scam victims often double down and put on blinders, because the alternative would mean they were being scammed and they don't want to accept that. But man, those are a huge pair of blinders.

PlunderBunny• 2 years ago

And even at the end, he thought that he could have got it back if he hadn't been arrested at that time.

It scares me a bit: I think I'm smart enough, and not greedy, to fall for this kind of scam. But I suppose many people that fall for scams also think they're smart (I wonder if they think about whether they are greedy?). Often they are hit at a time in their life when they are vulnerable. So can I really be sure of myself?

Likewise, I think of my elderly parents - I tell them how to look out for these scams, and all the warning signs, and they understand, but maybe there's a moment where the scam might work on them long enough.

I think the common case in a lot of these scams is that people operate by themselves at the beginning (that's a vulnerability the scammers exploit). So a good defence is to have a trusted family member to share all money matters with.

Havoc• 2 years ago

Perhaps this CEO wasn’t familiar with how banking works…

DylanDmitri• 2 years ago

It could be the guy was fine, and then something happened (bad case of long COVID?) and he’s left with the authority but not the discernment.

wavemode3• 2 years ago

As always, Yes, Minister is more documentary than comedy: https://www.youtube.com/watch?v=KgUemV4brDU

aga98mtl• 2 years ago

A sane bank CEO would never get taken by such a simple con. The guy must have been suffering of some kind of dementia. It can happen at any age.

fwip• 2 years ago

My money is on overconfidence. He's a bank CEO, so "of course" he knows all the risks around the latest financial wizardry (in this case crypto). The possibility that he doesn't know what he's doing simply wouldn't occur to him.

tehlike2• 2 years ago

One thing I didn't get is if he wired the money to a bank account (and not a random cryptocurrency address), how could they not found the scammers who did this.

alwa• 2 years ago

I believe he sent it to be converted into crypto, which he sent to a random cryptocurrency address.

yieldcrv4• 2 years ago

I don't get that impression and the article doesnt say

There are bank accounts in random countries he goes to visit or thinks he needs to visit, and an article saying money from the bank is wired directly into a crypto wallet, which is impossible. I’ve used institutional OTC desks that convert your incoming wire into a crypto asset and address of your choice at a pre negotiated exchange rate, but that is such a specific thing that you cant accidentally do

No crypto was harmed in this scam

mingus882• 2 years ago

The article makes it sound like it was wired directly to a crypto wallet in Hong Kong

Bank or not, good luck tracing anything through China. Odds are good this could have even been a nation state level scam run by North Korea. They get a lot of funding this way.

dboreham• 2 years ago

"Wiring to a crypto wallet" isn't a thing. It'd be crypto product of the century if it existed.

_lvbh• 2 years ago

Isn’t Hong Kong still somewhat independent with its own government, laws, etc?

bagels2• 2 years ago

What makes you think the bank account wouldn't be stolen, opened in a foreign country, or opened with false credentials?

TheDong• 2 years ago

The terms of art here are money laundering and "Money Mule" https://en.wikipedia.org/wiki/Money_mule

Basically, the real scammers have a series of people who have bank accounts, but don't know the true identity of the scammer, and those people receive the wire and transfer the money in some other form.

Often, the "Money mules" don't even know they're part of a crime, and are told they're receiving legitimate money to their personal accounts, withdrawing it, and transporting it somewhere.

Sure, you can track down and try to arrest the money mules, but it doesn't feel great to arrest someone who was only an unknowing participant.

tehlike2• 2 years ago

Thank you, I briefly read about mules before. It makes sense

tim3332• 2 years ago

Normally if mucking around with crypto you wire the money to a broker such as Coinbase or Kraken who then change it to crypto and then it goes off to random cryptocurrency addresses. The article doesn't say which institution it went to but they were probably not the scammers themselves.

derangedHorse3• 2 years ago

Because law enforcement in the US is corrupt and incompetent. They prosecute those who undermine them, instead of scammers who undermine American citizens. It's crazy the number of cases I see towards those who convert Bitcoin for US dollars due to circumventing MSB laws that allegedly enables money launderers but have no proof, while there are those who are provably stealing money who never get caught or even investigated.

Just try and find a case of fraud that was reported and successfully resolved by the FTC for an average American. I know people who have collectively lost over $1m who have never, and probably will never, see any resolution to their case. Some scams even have public founders and work using traditional financial rails.

readthenotes12• 2 years ago

Great example of sunk cost Fallacy!

stouset• 2 years ago

“There were people who lost 70, 80% of their retirement” as a result of Hanes’ actions, Mitchell told CNBC on Wednesday in a phone interview.

Let this be yet another painful reminder to the rest of us that diversification of your retirement funds is critically important. Putting 70% of your life savings into one investment leaves you with the stark possibility of surviving off only 30% of what you spent a lifetime saving.

pmarreck• 2 years ago

Why was the bank owner completely culpable for getting scammed?

hungie• 2 years ago

He wasn't. If he lost only his own money, he'd be a victim. He stole tens of millions of dollars from other people, ruining them, and sent it to scammers. (Because he thought he could keep the profits from the scammers.)

User232• 2 years ago

He should have read Bill Black’s classic The Best Way to Rob a Bank is to Own One.

mnky9800n• 2 years ago

If I spend money on a taxi and try to reimburse it I get a colonoscopy from my administration. This guy was like, "hold my beer..."

keskival• 2 years ago

In these types of things, especially as the CEO was described as very intelligent, they should assume the cryptowallet is actually in his own control.

There is little reason to assume the CEO in fact didn't orchestrate this whole purported "scam".

tim3332• 2 years ago

You can probably trace where the money went on the blockchain.

throwoutway• 2 years ago

How do you trace the wallet though?

Crypto 'pig butchering' scam wrecks bank, sends ex-CEO to prison for 24 years

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