The DC Department of Insurance, Securities and Banking (DISB) cautions residents to be on guard against investment fraud and a rapidly expanding scam known as “pig butchering.”
How is the scam perpetrated?
“Pig Butchering” scams mimic the practice of fattening a pig before the slaughter. Scammers refer to their victims as “pigs” and establish connections using fictitious identities, the guise of potential romantic relationships or friendships, and elaborate storylines, almost always playing on the victim’s emotions. In the past year, according to the Federal Trade Commission, there were 381 victims of these scams in the District of Columbia, costing victims nearly $4 million. Scammers “fatten up” victims by convincing them that they are in trusted relationships with the scammers. Then, the scammers “butcher” their victims by causing them financial and emotional ruin. This is accomplished by convincing victims to invest a significant portion of their savings in virtual currency and then slowly and meticulously stealing it. By the time victims realize they have been scammed, it’s too late. Their money is gone forever.
To scam investors, fraudsters will:
- Make initial contact with a potential victim through mobile text messages, direct messages on social media, or other communication tools and platforms, often pretending that they reached the wrong number or were attempting to reach an old friend. When the victim responds to the scammer, they will quickly persuade the victim to move their conversation to an application such as WhatsApp to message privately.
- Over several months, gradually introduce the victim to a purportedly lucrative investment opportunity in virtual currency using a fraudulent virtual currency investment website or application controlled or manipulated by the scammer.
- Show the victim exaggerated returns on their bogus investment account statements and persuade the victim to invest along with them.
- Aggressively push the victim to keep investing by using their life savings and retirement account funds, and when the cash runs out, taking out personal loans from financial institutions, friends, and relatives.
- Abruptly cease communication with the victim when they demand the return of all the money they invested or are unable or unwilling to invest any more money.
Avoid Investement Adviser Scams
- Never respond to unsolicited messages from unknown contacts via text message or communicate with unknown individuals through encrypted messaging applications.
- Don't share your personal financial information with anyone you do not know and cease communication with parties who consistently decline in-person interactions.
- Use web search engines to carefully research the investment product, trading platform, and the person or organization requesting your investment. Add words like “scam” and “fraud” to your web search.
- If the person who contacted you claims to be a representative of a legitimate investment company, look up that person and their firm on FINRA’s Broker Check at brokercheck.finra.org to confirm that they are genuine and do not have an unsavory background.
- Stay clear of investment opportunities that seem too good to be true.
If you believe you have been the victim of an investment adviser scam or other financial fraud, contact the DISB Enforcement and Consumer Protection Division at (202) 727-8000. You may also file a report with the Federal Trade Commission (FTC) at reportfraud.ftc.gov or call the FTC Consumer Response Center at 877-382-4357.
The mission of the Department of Insurance, Securities, and Banking (DISB) is three-fold: (1) cultivate a regulatory environment that protects consumers and attracts and retains financial services firms to the District; (2) empower and educate residents on financial matters; and (3) provide financing for District small businesses.