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People Are Losing Millions to 'Pig Butchering' Crypto Scams

Pig
(Image credit: Shutterstock)

It seems like we're going to have to learn some new lingo. Shortly after Chainalysis introduced us to "rug pulls"—in which someone runs a seemingly legitimate cryptocurrency project, takes money from wannabe investors, then vanishes—The Denver Channel reported that a man lost $1.6 million to a "pig butchering scam."

Before we begin: the scam doesn't have anything to do with trading Bitcoin for bacon, and no actual pigs are harmed due to these schemes. (At least so far as we can tell.) In this case, the "pigs," much like Soylent Green, are people.

"The victims are the pigs, and they're being raised for a good, long time," Global Anti Scam Organization spokeswoman Grace Yuen told The Denver Channel. "Suddenly, you go and try to withdraw money from this third-party investment platform, and you're unable to. That's when you know that pig has been butchered."

This reportedly happened to Steve Belcher, a 52-year-old software engineer, when he was convinced to "invest heavily in the volatility of Bitcoin" on a platform that used the Tether (USDT) cryptocurrency. Belcher invested $1.6 million and had 8 million USDT when his seemingly legitimate investment plan had reached its end.

That's when the scam was revealed. The Denver Channel reported that Belcher was told, "you need to repay the loan before you can withdraw cash from your account." The site wanted $1.5 million to release the funds, and when Belcher asked for it to be taken out of the $8 million he thought he'd earned, the request was denied.

Most cryptocurrency-related scams aren't particularly novel, but Chainalysis reported that people lost $7.7 billion to them in 2021, so they're still pretty effective. So what makes this incident stand out from the countless other scams of the year?

The first is that Belcher is a software engineer who, according to The Denver Channel, has actually earned about $70,000 by investing in cryptocurrency. So this isn't a technically illiterate person being swept up by scams using buzzwords like "artificial intelligence supercomputer" or promising impossible returns on investment.

The second is that shorting Bitcoin is fairly common. Doing so with a stablecoin like Tether, which is priced one-to-one with the US Dollar, makes a certain amount of sense. It means that Belcher knew exactly how much he was investing in the platform and—if this site wasn't a scam—how much he'd earned as a result.

Many crypto scams rely on a fundamental misunderstanding of how the cryptocurrency market (or the investment market in general) actually works. That doesn't seem to be the case with this pig butchering scam— it succeeded against an already-successful crypto investor with prior technical knowledge.