SAN FRANCISCO (KGO) -- A Bay Area software developer lost more than $1.3 million in a widespread cryptocurrency scam that's draining the bank accounts of Silicon Valley investors.
Federal investigators say the scam known as pig butchering is specifically targeting Asian-Americans in the Bay Area, according to the I-Team's original report.
The latest victim's story
For a woman we're referring to as "R" it all started on LinkedIn.
"I let my guard down," she told ABC7.
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Investigators confirm a man who called himself, MingGuang Zhang, contacted R on a professional networking site.
R says Zhang claimed to be a technical director for a Fortune 500 company in the U.S.
"This person had a very impressive profile," R said. "He said he went to the same school as me in China."
Their friendly conversation quickly moved to WhatsApp. R expressed interest in dabbling in cryptocurrency and Zhang offered to help.
"He started talking, why don't you do something with me?" said R. "I can help you make money."
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It sounded easy. R first sent three payments equaling $65,000 from her bank to a trading app Zhang suggested. The app showed she made a 20% profit.
So Zhang encouraged her to open a new account with another bank. The alleged scammer told her if she used her retirement fund for investment, she could return it within 60 days. R emptied her IRA and transferred $900,000 in late October.
Zhang sent her a platform to do the trades that appeared legitimate. The platform falsely showed R had already made a profit. But, she learned the hard way -- it was a scam.
"Once the money goes in there," said R. "It's gone."
Cryptocurrency is a high-risk investment but can have big rewards.
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R gambled and lost it all.
But, Zhang was persistent promising he could help her make the money back. He said he'd put in $1 million as long as she could send more money.
Feeling desperate, R consulted her husband and sold $400,000 of stock to make the final payment through the platform.
Within minutes, it was gone.
"It's been a nightmare," R said in tears.
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How the pig butchering scam works
Pig butchering has become a nightmare for victims around the world.
"It's basically two individuals that are meeting on a dating website or a social media platform and they develop a fake relationship that's built on false trust," said U.S. Secret Service Agent Shawn Bradstreet. "Usually the suspect convinces a person to invest in a cryptocurrency or some type of investment scheme."
According to the FBI, the scam started in China in 2019, but has now become more prevalent in the U.S. Federal investigators say pig butchering cases across California have tripled so far this year - with a majority of the victims in the Bay Area.
Cracking down on crypto crimes
The ABC7 News I-Team sat down with the Digital Asset Technology Alliance, the nation's first and only team staffed by the U.S. Secret Service to crack down on pig butchering cases.
Stephanie Sierra: "What are you doing to crack down?"
Shawn Bradstreet: "Just here locally, we've actually created a squad. It's a Digital Asset Technology Alliance, and it's specifically just targeting digital assets."
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Special Agent Frey showed the I-Team how suspects are using new technology to create counterfeit crypto sites that mimic legitimate companies. An example being "CoinbaseBIT," a fake remake of the legitimate crypto trading site Coinbase.com.
"So this is just a facade," said U.S. Secret Service Financial Analyst Andrew Frey, pointing to a fake crypto website.
Investigators say some of these apps can appear legit -- claiming to be recommended by Apple with a 4.9 rating.
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"To most folks, there aren't really many red flags or alarms going off with these sites," Frey said.
To prevent falling victim to these fake sites, always research the app or website first and check the URL for misspellings. Frey shared an example that impersonated the legitimate company Coinbase.
According to Frey, the counterfeit site appears legit but instead of coinbase.com, the URL is coinbasedapp.net. Plus, some of the site's links don't work.
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"Most of these pig butchering websites just don't have many functioning links," Frey said.
But as the U.S. Secret Service warns, many sites don't have those red flags.
"Simex.IDN.com is an example," he said. "There are sites like this with a very compelling product, functioning links for you to buy, sell, crypto. But in actuality, any of the crypto that you're buying here is actually going straight to the criminal organizations."
Following the money
Once the money is sent, it's hard to get back.
"If you contact us 30 days, a month later, it's going to be very difficult to trace and get the funds at a place where we can get it back to the victim," Bradstreet said.
According to the U.S. Secret Service, most victims who report a crime in less than 48 hours have more than a 75% chance the feds will be able to seize their money. Whereas, if it's been more than 48 hours, the probability drops down to less than 10%.
The impacts go beyond just financial loss.
In R's case, she fell into a deep depression. She not only lost her job just as she was about to retire, but in total, she lost more than $1.3 million.
"It's very hard, very hard on my family," said R. "Every morning I wake up, I feel it's a nightmare."
Crypto companies & LinkedIn respond
Cryptocurrency exchange platform Coinbase told ABC7 they routinely block cryptocurrency addresses that are associated with scams and conduct blockchain analysis on fraudulent addresses. The company recently posted a blog post on this topic.
"We're deeply sorry to hear about any customer that was impacted by this scam and have been investing significant resources to mitigate them. We will remain vigilant and do everything we can to keep folks who use Coinbase safe and secure," the company wrote in a statement to ABC7. "Coinbase is working with industry partners to take down these sites and developing ways to warn users when visiting known scam sites in order to help limit the damage caused by this type of scam. Coinbase educates its users on how to identify the signs of a potential scam."
The company advises the following security steps can be taken to defend your assets:
- Be wary of investments that claim a guaranteed return
- Be wary of investment advice and opportunities from unknown or untrusted sources
- Do not visit or connect self-custody wallets to any unknown site
- Do not hold high value assets in the same wallet used to regularly interact with apps. Use cold storage or custodial solutions such as the freely available token approval checker to validate actual permissioning on self-custody wallets and revoke approvals that you did not knowingly authorize.
The crypto exchange and bank Kraken told ABC7 most scams that target the company and its users rely on fake websites and apps created by scammers.
"We proactively identify these counterfeits and work aggressively to take them down. We also provide an extensive library of guides on our support page to help crypto users identify common signs of scams and keep their funds safe," the company wrote in a statement.
"We enforce our policies, which are very clear: fraudulent activity, including financial scams, are not allowed on LinkedIn. We work every day to keep our members safe, and this includes investing in automated and manual defenses to detect and address fake accounts and suspected fraud. You can learn more about the work we do to keep members safe here," the company wrote ABC7.
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