Tracking Money Flow Through Crypto Platforms in “Pig Butchering” Scams

The industrialization of romance fraud schemes that exploit assets moving through crypto platforms, known as “pig butchering” scams, has generated a global money flow problem now worth billions, according to an article by Elliptic.

Pig butchering scams typically begin with online manipulation. Victims are persuaded to invest in fraudulent crypto platforms. Early “baiting” returns convince them of the scheme’s legitimacy. Then they are locked out of the accounts, and their assets are drained.

Elliptic reports that organized crime in Southeast Asia operates networks of trafficked laborers and online brokers, held against their will to siphon funds from victims through fabricated crypto investment platforms.

Law enforcement is struggling to deal with cross-border complexities and mounting financial losses. The ability to trace blockchain transactions has become central to dismantling these networks.

Crypto Asset exchanges and virtual asset service providers sit at critical junctures of this money flow. They process transfers between victims and scam-controlled wallets, often without their knowledge.

Red flags include sudden high-value purchases by inexperienced traders, small test or baiting transactions, and repeated exposure to wallets linked to known scam addresses. Once stolen, crypto assets are funneled through intricate laundering schemes. 

Funds are aggregated in pooling wallets, moved through multiple intermediary addresses, and sometimes transferred across blockchains (“chain-hopping”) before being converted to fiat currencies via money mule accounts. These accounts often share common Know Your Customer (KYC) data, IP addresses, or origins in countries associated with organized scam networks.

Compliance attorneys at financial institutions and public sector agencies play a crucial role in disrupting the pig-butchering process and facilitating the recovery of victims’ funds. Doing so requires knowledge of red flag behaviors. Analytics platforms offer on-chain behavioral detection, enabling the tracing of illicit money flows and supporting coordinated recovery actions.

Recent US enforcement actions, including a $225 million seizure, demonstrate the growing success of public–private collaboration in disrupting this global fraud economy.