PYMNTS MonitorEdge May 2024

DOJ Charges 2 With Money Laundering Around ‘Pig Butchering’ Scams

Two Chinese nationals have been charged with leading a scheme to launder proceeds from cryptocurrency investment scams.

The indictment, unsealed in the Central District of California Thursday (May 16), names two individuals who have been arrested: Daren Li, a dual citizen of China and St. Kitts and Nevis, and Yicheng Zhang, a Chinese national, the Department of Justice said in a Friday (May 17) press release.

According to court documents, Li, Zhang and their co-conspirators managed an international syndicate that laundered proceeds from cryptocurrency investment scams. These scams, commonly known as “pig butchering,” fraudulently induced victims into transferring millions of dollars to U.S. bank accounts opened in the names of shell companies. The sole purpose of these companies was to facilitate the laundering of fraud proceeds, according to the release.

Once the funds were received in the U.S. bank accounts, it’s alleged that a network of money launderers facilitated the transfer of these funds to other domestic and international bank accounts and cryptocurrency platforms. The scheme aimed to conceal the source, nature, ownership and control of the funds, the release said.

The investigation found that over $73 million was laundered through U.S. financial institutions to bank accounts in The Bahamas. Additionally, a cryptocurrency wallet involved in the scheme received more than $341 million in virtual assets, per the release.

Li and Zhang allegedly played key roles in the money laundering network. They instructed their co-conspirators to open bank accounts in the names of various shell companies. Li helped operate one of the bank accounts at Deltec Bank in The Bahamas, according to the release.

The funds were allegedly then converted into cryptocurrency and sent to virtual-asset wallets, including one controlled by Li. Zhang also directly received victim funds, the release said.

The defendants face charges of conspiracy to commit money laundering and six substantive counts of international money laundering, which carry a maximum penalty of 20 years in prison for each count if convicted, per the release.

A study published in February by researchers at the University of Texas at Austin found that at least $75 billion in cryptocurrency alone was stolen between 2020 and 2024 due mostly to pig butchering fraud.

Pig butchering scams — which are named after the practice of farmers fattening up their livestock before slaughtering them — generally involve establishing connections with victims via wrong-number text messages whose conversations eventually lead to promises of fake investments.