brokerwatch

Investment Fraud | “Pig Butchering” or “Romance” Scams

Investment Fraud | What are Pig Butchering Scams?

“Pig butchering scams involve fraudsters gaining the trust of victims, oftentimes via a fictitious romantic relationship, and duping them into making investments into fake cryptocurrency projects. These schemes typically begin with a victim meeting someone on an online dating website. Alternatively, a victim may receive a random unsolicited message on social media, via text, or through a messaging application, with the conversation eventually appearing to turn romantic. The victim will then be convinced to begin transferring money to an […] investment opportunity recommended by the scammer. The scammer will eventually highlight seemingly impressive monetary gains from initial investments and encourage the victim to invest increasingly larger amounts, ultimately resulting in financial ruin to the victim.” (United States Secret Service)

The Financial Industry Regulatory Authority (FINRA) lists the warning signs of such scams on its website: 

• Unexpected contact: Never respond to unsolicited messages from unknown contacts, even about seemingly benign topics, especially via text message and on encrypted messaging applications.
• Refusal to participate in video chats: If someone you’ve been messaging with consistently declines to interact face-to-face, they likely aren’t the person from the profile photo.
• Request for financial information: Don’t share any personal financial information with individuals you’ve never met in person. If a new virtual friend or romantic connection starts making financial inquiries, put the brakes on the relationship.
• Invitation to invest in specific financial products: Be wary of any unsolicited investment advice or tips, particularly from someone you’ve only spoken to online and even if they suggest you trade through your own account. Always question what a source has to gain from sharing tips with you and whether the transaction fits with your financial goals and investment strategy.
• Unknown or confusing investment opportunity: Carefully evaluate the product, as well as the person and/or company requesting your investment. Along with a basic search, try adding words like “scam” or “fraud” to see what results come up. Consider running recommendations by a third party or an investment professional who has no stake in the investment, and use FINRA BrokerCheck to see if the promoter is a registered investment professional.
• Unfamiliar trading platforms: Do extensive research before moving any money, particularly in an emerging market like cryptocurrency, which has hundreds of exchanges and new avenues for trading continuing to evolve. Who controls the platform? What security measures are in place? How can you withdraw funds if needed? If you don’t know the answers to those questions, don’t put your assets there.
• Exaggerated claims and elevated emotions: Take a closer look at any investment that offers much higher than average returns or is touted as “guaranteed.” Fraudsters will also often use their knowledge about you to appeal to your emotions—something like, “Don’t you want to have money to send your kids to college?”
• Sense of urgency about an upcoming news announcement or share price increase: Remember that insider trading is illegal, and you should never trade in shares of a company on the basis of material, nonpublic information.

Investment Fraud | I am a victim. What should I do?

In a recently filed claim with the Financial Industry Regulatory Authority (FINRA), Peiffer Wolf highlighted how “Federal law requires banks to know their customers and understand their customers’ banking behavior. […] Thus, [a bank] is required to collect information about the holder of each account to stave off fraudulent activity.“

In 2020, FINRA itself noted that brokerage firm Interactive Brokers “failed to reasonably investigate certain potentially suspicious activity that occurred through the Firm. Despite the Firm’s growth, it did not sufficiently increase its AML compliance staff during the Relevant Period. The Firm also lacked an effective case management system; analysts, therefore, could not readily learn information about prior AML investigations concerning the same customers or identify patterns and trends. Because of these failures, Interactive Brokers failed to reasonably investigate numerous instances of suspicious activity that appeared on its surveillance reports, and failed to identify that some were Ponzi schemes, market manipulation schemes, and the like.” According to The Wall Street Journal, “Interactive Brokers LLC has agreed to pay a total of $38 million to settle claims by U.S. regulators that it failed for more than five years to maintain an adequate anti-money-laundering program.”

More recently, in 2024, “TD Bank, which is the 10th largest bank in the U.S., failed to take action despite government regulators and the company’s own internal auditors repeatedly pointing to potential issues with its procedures to detect suspicious transactions […]”, CBS News reported. 

When banks and other financial institutions fail to stave off fraudulent activity, it is imperative to understand your rights. If you or a loved one has fallen prey to investment scams, you may be able to recover your losses. 

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Peiffer Wolf has represented thousands of victims and we remain committed to fighting on behalf of investors. Contact us today by filling out a Contact Form on our website or by calling 585-310-5140 to schedule a FREE Case Evaluation.