JMD Live Online Business Consulting has developed this material to make customers aware that scammers are always looking for new ways to part you from your money. The case study below highlights some of the risks of transacting with crypto. We hope that you will be vigilant before sending any crypto out of your crypto account. Remember, crypto transactions are different from traditional bank transfers and are irreversible.
This case study is intended as educational content. If you are concerned about a potential scam, please contact us.
Don’t fall for these scams!
Con artists preying on people looking for love is nothing new, but the latest scams have moved on from asking you to buy gift cards to an array of crypto scams. Scamming daters out of their crypto has become something of a cottage industry. Romance scammers conned victims out of $139 million worth of cryptocurrency last year.
Crypto romance scammers don’t just target those who are actively looking to date through dating sites, they may message on Instagram, or even via SMS, Skype, WhatsApp, Telegram, Google Chat, even Signal and pretend it was by mistake. As these sinister tactics become more and more popular, it’s helpful to be aware of red flags and remain vigilant.
Unlike the so-called Nigerian prince scams, where a stranger emails you with an offer of money, crypto dating scams aren’t obvious at first. Crypto dating scammers invest a lot of time in their victims, maintaining a relationship until they feel that trust has been established, and the victim is ready to be exploited. Most crypto dating scams follow the pattern called "pig butchering," or “sha zhu pan” (杀猪盘) in Chinese, so-called because scammers continuously flatter and make their victim feel good before conning them, just like a farmer fattens a pig before slaughter.
In many reported cases, scammers spend weeks or months in a relationship before bringing up crypto and the potential it offers. Anyone who uses the web is at risk of crypto scams, not just those who have crypto investments. In fact, scammers put a lot of effort into walking you through your first crypto purchase through legitimate exchanges. Things only go downhill from there. This type of psychological manipulation is called “social engineering,” and socially engineered crypto scams even target tech-savvy founders of crypto projects.
Before crypto became the main vehicle of choice for pig butcherers, scammers convinced victims to buy online gift cards. Then crypto came, with its promise of self-custody and little to no customer protection! Some scams are as simple as being tricked into sending crypto to strangers who have built trust with their victims. The old advice of not sending gift cards to online strangers also applies to crypto.
But there are other ways of scamming that don’t even involve the victim directly sending crypto to the scammer. Scammers may also tell you about lucrative returns through “liquidity pools” or “liquidity mining” in decentralized finance, or DeFi. They want to help you achieve the same returns, and they’ll tell you where to invest. Under the guidance of your scammer, you may end up investing your funds into coins controlled by scammers.
Scammers will later dry up the liquidity in the pool you invested in, leaving you with worthless tokens.
How Does It Work?
Scenario 1
John has recently signed up for several dating apps. John matches with Ash on Tinder. John starts a casual conversation and finds Ash to be interesting and they exchange phone numbers. They migrate to WhatsApp or WeChat, two common platforms used for romance scams.
Ash messages John and they chat for quite some time until they've built some trust. When chatting one day, Ash mentions that she has been investing in cryptocurrency and tells John about the profits she has made lately. John is curious and now tempted to invest in cryptocurrency as well. Ash mentions that she “invests” with a site called “abc.ca”.
Ash asks John to open a crypto account, send funds from his bank account, buy Bitcoin or Ethereum and send the crypto to abc.ca. With Ash guiding him through the process, John feels very comfortable moving his money from his bank account to his crypto account and ultimately to a crypto wallet he is unfamiliar with. John follows through with sending crypto to abc.ca. Ash tells John he made the right decision, that his initial investment is now highly profitable and encourages him to invest even more money.
Scenario 2
John has recently signed up for several chatting apps. John receives a Skype text message from Ash, a person he does not know. John notifies Ash that he does not know her. Ash answers that she is sorry and introduce herself. John starts a casual conversation and finds Ash to be interesting. They migrate to WhatsApp or WeChat, two common platforms used for romance scams.
Ash messages John and they chat for quite some time until they've built some trust. When chatting one day, Ash mentions that she has been investing in cryptocurrency and tells John about the profits she has made lately. John is curious and now tempted to invest in cryptocurrency as well. Ash mentions that she “invests” with a site called “abc.ca”.
Ash asks John to open a crypto account, send funds from his bank account, buy Bitcoin or Ethereum and send the crypto to abc.ca. With Ash guiding him through the process, John feels very comfortable moving his money from his bank account to his crypto account and ultimately to a crypto wallet he is unfamiliar with. John follows through with sending crypto to abc.ca. Ash tells John he made the right decision, that his initial investment is now highly profitable and encourages him to invest even more money.
Key Observations:
The core idea of this scam is to know the victim's financial capacity and play the game until all funds are depleted. If John has mentioned in his chats that he has $100k in his savings account, Ash will try her best to get all the funds invested with the scam platform. Once Ash knows that John’s funds are depleted, Ash abandons John on all communication platforms and disappears without leaving any trace. Once Ash disappears, John realizes that he has been scammed through an elaborate confidence game widely known as the Pig butchering scam.
A Pig butchering scam is an elaborate confidence game. Anywhere from weeks to months are invested in orchestrating an elaborate scam with the sole objective of completely draining the victim's funds. In these cases, scammers build a strong bond of trust with you to encourage you to willingly send them large amounts of money. Individuals that fall for this type of scam often swear that their investor is amazing, and they have a hard time believing and accepting that they scammed them.
Do:
If someone on a dating or chatting platform talks about cryptocurrency investing:
- Run your due diligence: Victims of crypto dating scams consistently report that their online partner refuses to meet them in person or video call them because they’re shy, and they aren’t ready yet. It’s because scammers use photos of other people to create realistic online profiles. Performing a reverse image search of those photos can help you confirm the identity of the person.
- Before investing any money following someone’s advice, invite that person to a video chat to discuss more about cryptocurrency. If they are a scammer, chances are they will not go on a video chat with you.
- Investigate the website that this person mentioned to determine if the website is a scam.
- Remember that crypto transfers are different from traditional money transfers and that once sent, they cannot be reversed.
- If you strongly suspect that your potential new date is a scammer, block their account through all communication channels.
- Please report the incident to your local law enforcement and to the Canadian Anti-Fraud Centre.
Don’t:
- Send any additional crypto to the scam platform.
- Follow investment advice from anyone that is not a registered professional, especially from someone that you have not met in real life.
- Don’t sign unfamiliar contracts with your crypto wallet.
As hard as it may be to not trust your heart when you’re looking for love, it’s important to remain vigilant and skeptical, especially if money enters the conversation with anyone you’ve met online, or you’ll not only end up heartbroken, but plain old broke, too.
Michel Ouellette JMD, ll.l., ll.m.
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J. Michael Dennis, ll.l., ll.m.
Business & Corporate Strategist
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Disclaimer: All write-ups and articles do not constitute financial and legal advice in any way whatsoever but for information purposes only.
When making financial and legal decisions and commitments, we strongly recommend you consult your professional financial and legal services provider. Our website uses referral links to various crypto exchanges as a means of monetization. We appreciate it if you choose to use the in-article links, but the decision is ultimately yours.