The second report on crypto crime by Chainalysis explores the increase in pig butchering scams and how crypto facilitates such crimes.
*Warning – this article touches on sensitive and distressing topics related to child abuse material.
What is the benefit of cryptocurrencies as a digital asset? Its core ethos is to provide a peer-to-peer transaction system that does not rely on financial intermediaries such as banks. With the plethora of positive benefits that cryptocurrencies bring, we sometimes forget the same advantages can also be used for negative purposes in the hands of criminals.
In the second part of the report on crypto crime, Chainalysis investigates the use of cryptocurrencies in criminal activities involving child sexual abuse material (CSAM) and pig butchering scams.
Use of Crypto to Facilitate CSAM Distribution
The number of crypto transactions involved in the buying and selling of CSAM by China-based vendors has increased since late 2023, with the share of CSAM distribution by said vendors peaking at 38.8% of the total inflow amount in Q1 this year.
According to the infographic representation of transactions by Chainalysis, subscription payments to these sites are charged US$5.40 per day on average, to a near-permanent subscription of 20,000 days for only US$41.30.
These sites also provide a fast yuan-to-crypto-conversion and typically use instant exchanges that provide immediate swapping services to cash out the cryptocurrencies paid for the service.
The Internet Watch Foundation (IWF), an organisation dedicated to stopping CSAM online, has indicated that it is hard to determine why these networks are growing in China. Nevertheless, on-chain trends show that these illicit services are showing signs of growth amongst China-based vendors, which speaks volumes about the abhorrent exploitation of children and minors.
Use of Crypto in Pig Butchering Scams
Scam cases have been one of the most troubling issues in Singapore, with over SG$651.8 million dollarsswiped from Singaporeans. As technology progresses, scam tactics have only become more and more sophisticated; the number of scam cases has jumped by 46.8% when comparing the figures from 2022 to 2023. What is troubling about pig butchering scams is they constitute one of the key methods by which Singaporeans lose their money.
What are pig butchering scams? They are named as such because bad actors say they ‘fatten up’ their victims before ‘slaughtering’ them to extract the most possible value. The process involves building a romantic relationship over time with the victim via text message or dating apps until they push them to send money to a fake investment opportunity.
Cryptocurrency transactions have rapidly been adopted by wallets created by these criminal entities only in 2024, highlighting a possible surge in the number of new scams being employed. According to Chainalysis, 43% of scam inflows in 2024 have gone to wallets that became active this year. This trend is more significant than in 2022, which saw 29.9% of total inflows go to wallets that became active that year.
One prominent criminal organisation that Chainalysis has tracked is the wallet belonging to the organisation managing KK Park, a building complex near the border town of Myanmar’s Myawaddy, which is a major hub for Internet fraud and human trafficking.
Past Crimes Linked to Scams by KK Park
According to an investigative piece by German broadcasting channel Deutsche Welle, thousands of people have been trafficked into the KK Park compound and forced to participate in the pig butchering scams under threat of violence or death.
Despite the criminal activities, the survivors that DW spoke to recognised the badges on the guards’ uniforms as those of the Karen Border Guard Force, part of the Myanmar junta which managed the Kayin state in the country. The faction had distanced itself from the regime at the start of 2024 and eventually rebranded itself as the Karen National Army in April.
Moreover, a Straits Times article has also highlighted that Southeast Asian citizens such as Malaysians have become the target of such trafficking scams, with the unfortunate individual only realising their predicament once they are entrapped within the compound with no escape.
According to Chainalysis, the wallet belonging to the organisation behind the criminal activities at KK Park has generated over US$100 million in revenue so far. These funds could have come from scam victims and ransom payments submitted by families to release their kin from the compound.
In the article, DW also managed to track down other wallets linked to the KK Park wallet. One of these was a wallet belonging to Wang Yi Cheng, a Chinese businessman based in Thailand. He received tens of millions of dollars worth of cryptocurrency from wallets used by KK Park.
At the same time, the large-scale organised crime at KK Park has been linked to Wan Kuok Koi, a criminal figure commonly known as ‘Broken Tooth’. Entities owned under him include the World Hongmen History and Culture Association in Cambodia, the Dongmei Group in Hong Kong, and the Palau China Hung-Mun Cultural Association in Palau.
All these associations have been sanctioned by the US for crimes and corruption. According to the sanction document, these organisations, especially the Hongmen Culture Association, have continued to operate under the guise of the Belt Road initiative, but it is unclear if the operations are officially approved.
Other Compound Locations with Criminal Activities
The KK Park compound is, unfortunately, one of the many criminal-linked areas that have popped up along the Moei River bordering Myanmar and Thailand. According to an article by Nikkei Weekly, at least 15 other criminal zones have been built along the waterway around the towns of Shwe Kokko and Myawaddy.
These locations contain several casinos and gambling dens, along with people crammed into bare buildings, making the place similar to penal colonies or concentration camps, as described in the article.
These criminal hotspots are, unfortunately, not limited to Myanmar only. According to Singapore’s Mandarin newspaper, Lianhe Zaobao, and Nikkei Asia, similar criminal networks have also congregated in Cambodia’s Sihanoukville, with unknowing users being lured into slave-like working conditions to operate scam centres.
Unwilling individuals have been forced to work as casino workers without recompense in these vice locations, leading to incidents of rebellion, one of which saw Vietnamese workers escaping a casino by swimming across the river bordering Cambodia and Vietnam.
Crypto Laundering through Huione Guarantee
The ill-gotten funds from these criminal entities have also been linked to Huione Guarantee, an online marketplace tied to the Cambodian conglomerate, Huione Group.
While the marketplace proclaims to be a legitimate business, its users utilise the platform primarily for illicit crypto-based activities, including pig butchering, investment fraud, and money laundering.
Many advertisers on the platform put little effort into masking their activities, seeking out services for illicit activities with coded words such as motorcades, which means they are looking for money mules to move money through several points and layers.
Moreover, the online marketplace has also received and sent funds to other sanctioned exchanges such as Garantex, which is used by Russian and Pro-Russian media entities to engage in malign interference operations, especially with the ongoing Russian-Ukraine war.
While cryptocurrencies are seen as an alternative means to fiat currencies, Chainalysis’s investigation into the dark web of CSAM and scams by organised crime has shown that more needs to be done to move digital assets away from being a tool for nefarious actors.
Read the full report on the website.
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