Love Is in the Air - Or Not                               CFTC Issues New Advisory Against Financial Romance Fraud Ahead of Valentine’s Day

On February 7, 2024 - just a week before Valentine’s Day - the Commodity Futures Trading Commission issued a timely advisory about financial romance fraud, also known colorfully as pig butchering. These scams are perpetuated on social media platforms, dating apps, and even more innocuously, messaging apps, where the criminal will pretend they meant to message someone else before engaging in conversation. 

How pig butchering generally works 

Though the execution may differ slightly, the broad strokes of financial romance fraud are always the same. The scammer will pose as a successful business person or entrepreneur located in a different city or country. The scammer will build rapport with the intended victim by chatting on a regular basis, sharing photos and even selfies, and occasionally even video calling. All of these steps are a ruse. The line are guided by a memorized script. The photos may be stolen or genuine but shared with many different targets. The video calls may be done by a professional actress in a studio or call center dedicated to financial romance fraud.

Once the scammer has established rapport with the intended victim - either for friendship or romantic interest - he will subtly introduce an investment platform, often a cryptocurrency exchange, brokerage, or mining operation. Eventually, the scammer will goad the victim into making investments in the platform. Since the platform is entirely controlled by the scammer and the syndicate he belongs to, it will post fake messages or screenshots, showing the victim made returns on his “investment.” The goal here is to get the victim to invest yet more money into the scam. If the victim tries to withdraw his money, the platform will ask for various fees in order to do so, but will never release the funds. The 

Warning signs of pig butchering 

With romance, networking, and other relationship-building activities now done online than ever before, people may have a hard time differentiating between genuine connections and potential scams. The CFTC warning focused on six red flags that indicate an online connection may be a financial romance fraudster, some evident in the narrative above.

One, they try to move the communication to a different messaging app, such as Telegram. Two, they talk to you frequently but always feign excuses for being unable to meet. Three, they claim to be successful from trading or investing, which will lead into the fourth and fifth signs, when they recommend a specific platform and then ask you to fund trading there. Finally, the victim will gain “a lot of money quickly or easily” on the platform.

To protect themselves, the CFTC recommends that people keep conversations to social media platforms or dating apps rather than private messaging apps. People should also reverse image search any provided photos, or get their friend to verify their identity by sending a selfie with their own name and date written on a piece of paper in the frame. People should do due diligence on prospective investments, including checking whether a business is registered with state or federal authorities; getting second opinions from trusted friends or family members; and learning more about romance scams from reputable sources like the Federal Trade Commission Consumer Advice and the CFTC. Finally, any fraud should be reported to the Internet Crime Complaint Center, and victims should never pay fees to get their money back, either on the platform itself or from “recovery” experts.

The future of pig butchering

The CFTC is not alone in warning consumers about the dangers of financial romance fraud. Given the scale of pig butchering - it is now an estimated billion dollar industry - multiple agencies have come out with their own advisories against financial romance fraud. On October 3, 2022, the Federal Bureau of Investigation issued a public service announcement against cryptocurrency investment schemes, which was reiterated by FBI Albuquerque just two months later in December as “more people hit the web looking for deals and romance” during the holiday season. In that same month, the Financial Industry Regulatory Authority (FINRA) also overviewed how these schemes work and gave warning signs and prevention tips.

These efforts seem to be working. There is more awareness of pig butchering, which is leading to more victims reporting possible crimes. In one case where Asian Americans collectively lost US$2.3 million, the CFTC was able to file an enforcement action against Debiex, the firm that used managers to solicit investment funds through the ruse of romantic relationships. In some cases, authorities are even able to recover victim funds, such as in the US$9 million in Tether the Justice Department seized from a pig butchering syndicate or the whopping US$112 million it seized through enforcement action authorized in Los Angeles, Arizona, and Idaho. 

Regulatory guidance is also helpful. Though not explicitly directed at pig butchering, the Financial Crimes Enforcement Network issued guidance on how money services businesses (MSBs) must handle business models related to convertible virtual currencies (CVCs). When followed, such regulatory guidance may make it more difficult for pig butchering syndicates to move funds and cash out at exit nodes.

Above any regulatory guidance or enforcement action, consumers must continue to take heightened vigilance against potential financial romance fraud. While people who are single may feel lonely on Valentine’s Day, they should be wary of who - or more accurately, what - they entertain on this holiday.