Governments of the world are taking steps to combat money laundering involving cryptos | Credit: Getty Images
Key Takeaways
- Four US citizens have been indicted for laundering millions from cryptocurrency investment frauds.
- The funds were amassed via “pig butchering” and other investment fraud schemes.
- The DoJ is taking steps to combat money laundering involving cryptocurrencies.
- ‘Nirvana hacker’ admitted to hacking two crypto exchanges.
Pig-butchering scams usually begin with scammers forming connections with unsuspecting individuals online. Fraudsters build trust over time and eventually coax their victims into investing in fake cryptocurrency ventures, using counterfeit websites that mimic genuine trading platforms. In some cases, victims initially receive actual returns, a tactic used to convince them of the scheme’s legitimacy.
The US Department of Justice (DoJ) has announced it has indicted four US citizens for laundering over $80 million from cryptocurrency investment frauds. They allegedly established shell companies and bank accounts to funnel the criminally acquired funds.
Crypto Investment Fraudsters Launder Over $80M, Facing Charges
Over the past year, these types of scams have increasingly attracted the attention of law enforcement agencies worldwide. However, there is still limited public knowledge about the identities and operations of the individuals behind them.
As per the announcement , the individuals are facing seven charges in a Los Angeles court. These charges include conspiracy to commit money laundering, hiding the proceeds of money laundering, and conducting international money laundering. Two of the accused have been apprehended and could face up to 20 years in prison if convicted.
The government has identified four individuals as defendants in this case: Lu Zhang, a 36-year-old woman from Alhambra, California, and three male co-defendants—Justin Walker, 31, from Cypress, California; Joseph Wong, 32, of Rosemead, California; and Hailong Zhu, 40, from Naperville, Illinois.
The DoJ’s indictment specifies that the funds were amassed via “pig butchering” and other investment fraud schemes. In “pig butchering” scams, scammers contact potential victims through dating apps, social media platforms, or via unsolicited texts or calls, often pretending it’s a wrong number. They gradually build trust with their targets before introducing the deceptive cryptocurrency investment opportunity.
Once victims transfer funds to the scammers’ accounts, these fraudulent investment platforms display fictitious profits to encourage further investments. However, these platforms do not let victims withdraw their funds.
Laundering Millions via Domestic and International Channels
The DoJ disclosed that the total fraudulent operation linked to this group involved at least 284 transactions. This, in turn, led to victim losses exceeding $80 million. The department said these funds were moved to both domestic and international financial institutions, More than $20 million was deposited into accounts directly connected to the accused individuals, the DoJ said.
First-Ever Conviction for Smart Contract Hacking
In a recent development, Shakeeb Ahmed, a senior security engineer, has pleaded guilty to hacking two decentralized exchanges. This case marks a landmark as the first-ever conviction for a breach involving smart contracts.
The United States Attorney for the Southern District of New York announced the conviction following Ahmed’s admission to the fraud charges. The statement detailed Ahmed’s involvement in the exploit on Nirvana Finance , as well as another attack on a decentralized crypto exchange.
As a part of his guilty plea, Ahmed has agreed to surrender $12.3 million. This includes about $5.6 million in cryptocurrency obtained through fraudulent means.
US Attorney Damian Williams underscored the importance of Ahmed’s conviction. He said that no matter how sophisticated cyber tactics may be, fraudulent activities will be swiftly detected and prosecuted.
In a broader effort to combat money laundering involving cryptocurrencies, US federal prosecutors have recently resolved a case involving Binance. The cryptocurrency exchange agreed to a settlement of $4.3 billion for charges related to anti-money laundering and sanctions law violations. Changpeng Zhao, the founder and former CEO of Binance, also admitted guilt to one count of money laundering and is currently awaiting sentencing.
The recent indictment of four US citizens highlights the growing prevalence of “pig butchering” scams worldwide. While regulatory bodies have issued warnings against these scams, fraudsters continue to adapt their tactics, making it increasingly difficult for unsuspecting victims to spot them.
It is important to note this is not a crackdown on cryptocurrency itself. Governments around the world are taking steps to combat all forms of financial crime, including fraud and money laundering. If cryptocurrency did not exist, these criminals would simply find other ways to exploit and deceive people. The key is educating the public about these scams and to work together to prevent them from happening in the first place.
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