The US Department of Justice (DoJ) has accused two Chinese citizens arrested for allegedly orchestrating a financial scam, known as the “pig butchering scam”, who laundered at least $73 million from victims through shell companies.
How the scam began and who are the perpetrators
The individuals, Daren Li, 41 years old, and Yicheng Zhang, 38 years old, were arrested in Atlanta and Los Angeles on April 12 and May 16, respectively.
The foreign nationals were “accused of conducting a scheme to launder funds amounting to at least $73 million related to an international cryptocurrency investment scam,” he said. declared Deputy Attorney General Lisa Monaco.
Prosecutors accused Li, Zhang and their accomplices of running an international syndicate that laundered funds obtained through cryptocurrency investment scams.
As part of the fraudulent operation, victims were allegedly tricked into transferring millions of dollars to U.S. bank accounts opened in the names of various shell companies.
“A network of money launderers then facilitated the transfer of those funds to other national and international bank accounts and cryptocurrency platforms in order to hide the source, nature, ownership and control of the funds“, the DoJ said.
Where the scam brought the money
The funds are believed to have been laundered through US financial institutions to bank accounts in the Bahamas and then subsequently converted into USDT or Tether and sent to cryptocurrency wallets, including one controlled by Li.
Specifically, Li and Zhang oversaw lower-level accomplices who moved proceeds overseas to bank accounts at Deltec Bank in the Bahamas. At least one of the bank accounts was operated with Li’s financial assistance, with Zhang also directly receiving victims’ funds, according to the unsealed indictment.
Both were charged with conspiracy to commit money laundering and six substantive counts of international money laundering; if convicted, they face up to 20 years in prison on each charge.
A very particular type of scam
“Pig butchering” scams often involve scammers approaching lonely, wealthy targets using messaging apps, dating services and social media platforms to build trust and convince them to invest in different schemes claiming to offer better returns, only to transfer their money in wallets under their control.
In December 2023, the US government announced some accusations against four citizens for their alleged participation to an illicit scheme that netted them over $80 million through cryptocurrency investment scams.
Last month, Google filed a lawsuit in the United States against two app developers based in Shenzhen and Hong Kong respectively, for flooding the Play Store with fake cryptocurrency apps to carry out cryptocurrency thefts using similar tactics.
The various countries involved in the cryptocurrency scam
Countries such as Burma, Cambodia, Laos, Malaysia, Myanmar and the Philippines have emerged as hotbeds of romance scams, often luring unsuspecting people with promises of lucrative jobs to transport them to so-called “scam factories,” where they are forced to participate in the operation.
A recent report published by BBC News detailed how a 24-year-old young man from Sri Lanka, recruited for a data entry job, was taken to Myawaddy, a city in southeastern Myanmar, and forcibly detained in a camp run by “Chinese-speaking shift supervisors.”
Additionally, the individual, identified as Ravi (name changed for privacy), he was tortured for refusing to participate, stripped of his clothes and subjected to electric shocks to his legs.
“I spent 16 days in a cell for not obeying them“, he was quoted as telling the British network. “They only gave me water mixed with cigarette butts and ashes to drink.”
In another case, a 21-year-old youth from the Indian state of Maharashtra was trafficked to Myanmar along with five other Indian men and two Filipino women in August 2022, but was eventually released after paying a ransom.
INTERPOL described the situation as a fraud fueled by human trafficking on an industrial scalewith the US State Department calling out China-based organized crime syndicates for posing as labor brokers to recruit English-speaking people from Africa and Asia.
Two brothers arrested for stealing $25M in innovative cryptocurrency theft (scam).
The development comes as the DoJ opened an investigation into Anton Peraire-Bueno, 24, of Boston, and James Pepaire-Bueno, 28, of New York, on charges of conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering; each of them faces a maximum sentence of 20 years in prison on each charge.
“The charges in the act [della truffa] derive from an alleged innovative scheme of the two defendants for exploit the very integrity of the Ethereum blockchain to fraudulently obtain approximately $25 million in cryptocurrency in approximately 12 seconds“the DoJ said.
The brothers, who studied at the Massachusetts Institute of Technology (MIT), would use their skills to complete the groundbreaking scheme in early April 2023 which involved a “one-of-a-kind manipulation” of the protocols underlying the Ethereum blockchain.
This allowed the defendants to fraudulently gain access to pending transactions, alter the movement of electronic currency and ultimately divert $25 million in cryptocurrency from victims to their accounts through a series of transactions designed to conceal ownership of the stolen funds.
How the cryptocurrency scam ended
“Anton Peraire-Bueno and James Pepaire-Bueno manipulated and altered the process and protocols by which transactions are validated and added to the Ethereum blockchain,” the DoJ said, adding that they “meticulously planned” the attack for several months.
Simultaneously, they have also taken measures to cover their tracks by hiding their identities and concealing their ill-gotten gains by creating shell companies, private cryptocurrency addresses, and foreign cryptocurrency exchanges; the MEV-Boost vulnerability exploited to compromise the integrity of the Ethereum blockchain was subsequently patched.
“The Peraire-Bueno brothers stole $25 million in Ethereum cryptocurrency through a technologically sophisticated and cutting-edge scheme that they planned for months and executed in seconds“Lisa Monaco said about the cryptocurrency scam. “As cryptocurrency markets continue to evolve, the Department will continue to root out fraud, support victims and restore confidence in these markets.“
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