U.S. authorities have announced the largest-ever seizure of cryptocurrency linked to sophisticated “pig butchering” investment scams, totaling over $225 million. This significant action by the Department of Justice (DOJ) targets a vast network that has defrauded victims globally out of billions.
The seizure, primarily involving the stablecoin Tether (USDT), was announced following a civil forfeiture action filed by federal prosecutors. It specifically targets funds traced through a sprawling web of fraudulent platforms designed to trick victims into believing they were making legitimate crypto investments.
Understanding “Pig Butchering” Scams
These confidence scams, often originating overseas and sometimes involving romance elements, build trust with victims over time. Scammers then persuade victims to invest increasing amounts into fake cryptocurrency platforms, likening the process to “fattening up” a pig before ultimately taking all their money. The FBI reported that crypto fraud accounted for over $5.8 billion in reported losses just last year.
Shawn Bradstreet, special agent in charge of the U.S. Secret Service’s San Francisco Field Office, highlighted the scale, stating, “This seizure of $225.3 million in funds linked to cryptocurrency investment scams marks the largest cryptocurrency seizure in U.S. Secret Service history.”
Tracing the Illicit Funds
The investigation, spearheaded by the U.S. Secret Service and FBI, leveraged advanced blockchain analysis tools. A key partner in tracing the laundered assets was the crypto exchange OKX and Tether, the world’s largest stablecoin issuer.
According to court documents, the seized funds were part of a sophisticated money laundering operation. This network utilized hundreds of thousands of transactions and complex blockchain maneuvers across numerous addresses and wallets to obscure the origin and ownership of the stolen assets.
Investigators, aided by information from OKX and Tether, traced the funds as they were sent by victims to 93 designated deposit addresses controlled by the scheme. The money was then moved through over 100 intermediary wallets before being consolidated into 22 primary accounts on the OKX exchange. Further shuffling occurred across 122 linked accounts, which were often tied together by shared IP addresses or the use of fake identity documents, pointing to a coordinated effort, potentially from locations like a call center in Manila, Philippines, identified as ITECHNO Specialist Inc. This intricate network is estimated to have processed approximately $3 billion in transaction volume over roughly a year.
High-Profile Victims and Consequences
The scam network targeted by the DOJ is connected to at least 434 identified victims worldwide, including dozens in the United States. While the full scope of losses is vast, among 60 victims whose losses have been specifically identified within the seized funds, the combined total exceeds $19 million.
One notable connection revealed in the forfeiture action links the seized funds directly to the collapse of Heartland Tri-State Bank in Kansas in 2023. Shan Hanes, the bank’s former CEO, embezzled over $47 million from the bank and lost a significant portion to this specific scam network. Hanes is identified in the complaint as the single largest victim among those whose losses were traced within the seized funds, losing $3.3 million. Hanes has since been sentenced to 24 years in prison for his crimes, which included stealing from other sources like a church and his daughter’s college fund to feed the scam.
The Future of Seized Assets
The $225.3 million in seized cryptocurrency is now subject to civil forfeiture proceedings. While the stated aim is eventually returning money to the defrauded victims, the path to restitution remains complex, partly because many victims of the wider scam network have yet to be identified. Additionally, there is potential for the seized crypto assets, particularly the USDT, to be added to a burgeoning federal stockpile of digital assets.
This record seizure underscores the ongoing efforts by law enforcement agencies to combat cryptocurrency-related fraud and target the sophisticated laundering operations used by criminal networks operating globally.
