6 ms·

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

111 points by pseudolus 2y ago

pbohun 2y 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 2y 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 2y ago
  In the big picture, it really depends whom you're scamming.
- voxic11 2y 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 2y 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".
    - paulryanrogers 2y ago
      > ... becomes fraud when you start lying, even if your intentions are "good". You have to prove they lied. I.e. that they knew they were defrauding customers, which goes to intent. Though I suppose it could be lying only later, in the cover up -- if Logan was stupid/lazy enough to trust dishonest people to build his game then deny or renege on refunds. Regardless I imagine we'll find out soon as he sues CoffeeZilla since he may be countersued or be otherwise unmasked in discovery. CZ already has videos of Logan saying CZ is a stand up guy who does good reporting.
- cellis 2y ago
  Scammers go to prison all. the. time. Just search news for "Fraud conviction".
- yieldcrv 2y 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 2y 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
    - yieldcrv 2y ago
      Did anyone bring the case? If nobody does or nobody complains to the state then it won’t happen
- bagels 2y ago
  A lot of the scams originate in other countries. Convincing them to prosecute on behalf of a foreign victim is difficult.
no_wizard 2y 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.
- deleted 2y ago
  [deleted]
- MattGaiser 2y 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_wizard 2y 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.
  - fortran77 2y 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.
wavemode 2y 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 2y 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.
- drwl 2y 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 https://en.wikipedia.org/wiki/Pig_butchering_scam
  - wcarss 2y ago
    evocative imagery gets clicks
    - ihumanable 2y ago
      This is the correct answer. News loves the term because it's eye catching and clearly not informative, that's why every article has to explain it.
- jcrawfordor 2y 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.
jrochkind1 2y 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 2y 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 2y 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.
    - jrochkind1 2y ago
      That's true, it's always easier to be caught up in a scam than you think it would be. I haven't been scammed, but I've been tricked by the cops into saying something in a certain situatoin I shoudln't have, even though i was a long-time ACLU member who thought I was an expert in your rights and best practices not to talk to cops! they're just really good at tricking people, they've been trained in it. As of course have scammers. Still... this one seems especially wild. What banker could think any legitimate financial instrument required you send to millions more to "activate"? Although I guess once you're in for $10 millionn, your incentive to avoid admitting you've been scammed is even higher? And I guess maybe "cryptocurrency" is something nobody actually understands but just seemed like magic money -- but what is a BANKER doing investing millions in a financial product he doesn't understand at all? It's pretty embaressing. And of course that's without even talking about the greed and complete abuse of money that wasn't his in a small town where literally knows the people he's stealing from of course. But just the sheer stupidity about financies from a banker. Like I wouldn't be shocked other people would fall for this, but a banker believes that this can possibly be a legitimate financial instrument and not a scam?? Maybe those scammers were really really good.
tehlike 2y 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 2y ago
  I believe he sent it to be converted into crypto, which he sent to a random cryptocurrency address.
  - yieldcrv 2y 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
- mingus88 2y 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 2y ago
    "Wiring to a crypto wallet" isn't a thing. It'd be crypto product of the century if it existed.
  - _lvbh 2y ago
    Isn’t Hong Kong still somewhat independent with its own government, laws, etc?
    - mingus88 2y ago
readthenotes1 2y ago
Great example of sunk cost Fallacy!
stouset 2y 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 2y ago
Why was the bank owner completely culpable for getting scammed?
- hungie 2y 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.)
User23 2y ago
He should have read Bill Black’s classic The Best Way to Rob a Bank is to Own One.
mnky9800n 2y 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 2y 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".
- tim333 2y ago
  You can probably trace where the money went on the blockchain.
  - throwoutway 2y ago
    How do you trace the wallet though?
- bartonfink 2y ago
  [flagged]
  - dang 2y ago
    Could you please stop posting unsubstantive comments and flamebait? You've unfortunately been doing it repeatedly. It's not what this site is for, and destroys what it is for. I'm not talking just about one comment—it's a pattern showing up in a whole bunch of your comments. We have to ban accounts that do that and I don't want to ban you, sof you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
antonellaleo 2y ago
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sarahwoodssarah 2y ago
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111 points by pseudolus 2y 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 2y 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 2y ago
In the big picture, it really depends whom you're scamming.
voxic11 2y 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 2y 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".
  - paulryanrogers 2y ago
    > ... becomes fraud when you start lying, even if your intentions are "good". You have to prove they lied. I.e. that they knew they were defrauding customers, which goes to intent. Though I suppose it could be lying only later, in the cover up -- if Logan was stupid/lazy enough to trust dishonest people to build his game then deny or renege on refunds. Regardless I imagine we'll find out soon as he sues CoffeeZilla since he may be countersued or be otherwise unmasked in discovery. CZ already has videos of Logan saying CZ is a stand up guy who does good reporting.
cellis 2y ago
Scammers go to prison all. the. time. Just search news for "Fraud conviction".
yieldcrv 2y 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 2y 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
  - yieldcrv 2y ago
    Did anyone bring the case? If nobody does or nobody complains to the state then it won’t happen
bagels 2y ago
A lot of the scams originate in other countries. Convincing them to prosecute on behalf of a foreign victim is difficult.

no_wizard 2y 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.

deleted 2y ago
[deleted]
MattGaiser 2y 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_wizard 2y 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.
- fortran77 2y 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.

wavemode 2y 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 2y 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.
drwl 2y 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 https://en.wikipedia.org/wiki/Pig_butchering_scam
- wcarss 2y ago
  evocative imagery gets clicks
  - ihumanable 2y ago
    This is the correct answer. News loves the term because it's eye catching and clearly not informative, that's why every article has to explain it.
jcrawfordor 2y 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.

jrochkind1 2y 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 2y 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 2y 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.
  - jrochkind1 2y ago
    That's true, it's always easier to be caught up in a scam than you think it would be. I haven't been scammed, but I've been tricked by the cops into saying something in a certain situatoin I shoudln't have, even though i was a long-time ACLU member who thought I was an expert in your rights and best practices not to talk to cops! they're just really good at tricking people, they've been trained in it. As of course have scammers. Still... this one seems especially wild. What banker could think any legitimate financial instrument required you send to millions more to "activate"? Although I guess once you're in for $10 millionn, your incentive to avoid admitting you've been scammed is even higher? And I guess maybe "cryptocurrency" is something nobody actually understands but just seemed like magic money -- but what is a BANKER doing investing millions in a financial product he doesn't understand at all? It's pretty embaressing. And of course that's without even talking about the greed and complete abuse of money that wasn't his in a small town where literally knows the people he's stealing from of course. But just the sheer stupidity about financies from a banker. Like I wouldn't be shocked other people would fall for this, but a banker believes that this can possibly be a legitimate financial instrument and not a scam?? Maybe those scammers were really really good.

tehlike 2y 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 2y ago
I believe he sent it to be converted into crypto, which he sent to a random cryptocurrency address.
- yieldcrv 2y 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
mingus88 2y 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 2y ago
  "Wiring to a crypto wallet" isn't a thing. It'd be crypto product of the century if it existed.
- _lvbh 2y ago
  Isn’t Hong Kong still somewhat independent with its own government, laws, etc?
  - mingus88 2y ago

readthenotes1 2y ago

Great example of sunk cost Fallacy!

stouset 2y 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 2y ago

Why was the bank owner completely culpable for getting scammed?

hungie 2y 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.)

User23 2y ago

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

mnky9800n 2y 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 2y 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".

tim333 2y ago
You can probably trace where the money went on the blockchain.
- throwoutway 2y ago
  How do you trace the wallet though?
bartonfink 2y ago
[flagged]
- dang 2y ago
  Could you please stop posting unsubstantive comments and flamebait? You've unfortunately been doing it repeatedly. It's not what this site is for, and destroys what it is for. I'm not talking just about one comment—it's a pattern showing up in a whole bunch of your comments. We have to ban accounts that do that and I don't want to ban you, sof you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.

antonellaleo 2y ago

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sarahwoodssarah 2y ago

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