Crypto scams likely hit a new record in 2024, driven by ‘pig butchering’ and AI, says Chainalysis

Crypto fraud revenue is estimated to have hit record levels last year amid a surge in so-called romance scams as cybercriminals leverage artificial intelligence and become more organized, blockchain research firm Chainalysis warns.

In a report released Thursday, the firm said that crypto wallets linked to scams received $9.9 billion in cryptocurrency in 2024, according to its initial estimates. It predicts 2024’s figure to grow to a record of $12.4 billion as Chainalysis identifies more scam wallets. 

Chainalysis added that its yearly estimates of scam activity have risen by an average of 24% between annual reporting periods since 2020. 

According to its 2024 report, a leading reason for the uptick in scam revenue was an increase in the prevalence of romance scams, commonly known as “pig butchering.”

Pig butchering is a type of investing or romance scam in which a fraudster builds relationships with victims via social media or dating apps, intending to con them out of money through a sham investment opportunity. 

The name “pig butchering” comes from the idea that scammers must first “fatten up” the victims with flattery and fabricated bonds before “butchering,” or stealing their money.

In 2024, pig butchering revenue grew nearly 40% year over year, with the number of deposits to pig butchering scams growing nearly 210% over the same period, according to Chainalysis. 

The firm said that those differing growth rates indicated an expansion of the victim pool, prioritizing more victims in exchange for smaller payments. 

While pig butchering scams predominantly originate from large scam compounds in Southeast Asia, there are signs that such scam centers have begun to become more geographically dispersed, the report stated. 

Last December, Nigeria’s anti-graft agency announced the arrest of 792 people in a raid on a building, where the suspects were believed to be running romance scams that targeted people mostly from Europe and the Americas, according to Reuters.

Romance scams often rely on human trafficking victims to carry out fraud. An investigation by ProPublica in 2022 outlined how Chinese criminal syndicates were trafficking victims to centers in Cambodia, Laos and Myanmar, forcing them to perform cyberfraud under threat of violence. 

While those scam compounds are often known for running pig butchering scams, they also act as havens for other types of frauds that can be carried out via the internet, according to Eric Heintz, a global analyst at International Justice Mission, who is cited in the Chainalysis report. 

“It’s not uncommon to have multiple criminal groups operating within the same compound focusing on different scams,” he added. 

The dynamic of multiple criminal groups operating within a compound has also materialized online through the creation of illicit crypto marketplaces and networks, according to Chainalysis. 

Primarily, this trend has been driven by Huione Guarantee, an online forum and peer-to-peer marketplace Chainalysis says operates as a “one-stop-shop” for illicit actors looking to buy and sell scam technology, infrastructure and resources. 

The Chinese-language platform is connected to Huione Group, a Cambodian conglomerate that offers legitimate services such as overseas remittances, insurance and, in the past, even luxury tourism offerings. 

According to Chainalysis, Huione Guarantee’s activity on blockchains indicates that it’s heavily used to support the pig butchering industry and for illicit crypto-based trading of scam technology products and services. 

One of the main services hosted on the platform is money laundering, which scammers use to conceal their illicit activity, according to Chainalysis data.  

Meanwhile, some of the illicit products found on the site include targeted data lists, web hosting services, social media accounts and AI software. In 2024, Huione scam technology vendors received at least $375.9 million in cryptocurrency. 

Since 2021, Huione Guarantee and vendors advertising through its platforms have processed $70 billion in crypto transactions.

“In short, Huione Guarantee has driven and enabled a scam ecosystem that is massive, growing, and interconnected,” the firm said in its report. 

Huione Guarantee did not respond to a CNBC inquiry.

In a disclaimer on its website, the platform says it does not participate in or understand its customers’ specific businesses and is only responsible for guaranteeing payments between buyers and sellers, according to a CNBC translation of the Chinese-language statement.

In 2024, some of the most successful vendors on the Huione platform were AI service providers, who saw revenue grow by 1,900% year over year, as per Chainalysis data. 

This growth indicates an explosion in the use of generative AI technology to facilitate crypto scams, which often entails scammers using the tech to impersonate others or generate realistic content that fool victims into making phony investments.

Chainalysis’s report said there are dozens of software vendors hosted on Huione Guarantee that sell this type of scam AI software. 

According to Elad Fouks, head of fraud products at Chainalysis and co-founder of fraud-detection app Alterya, who is quoted in the report, generative AI can be used to amplify and scale up crypto fraud and crimes. 

“GenAI enables the generation of realistic fake content, including websites and listings, to power investment scams, purchase scams, and more, making these attacks more convincing and harder to detect,” Fouks said. 

Some Huione vendors are even advertising “face-changing services” for $200 worth of cryptocurrency. 

Since OpenAI’s ChatGPT launched in 2022 and saw its popularity grow, there have been a growing number of cases of large firms losing millions to deepfake scams. Such scams use generative AI to create synthetic and fake identities and voices that allow fraudsters to impersonate real people and bypass identity verification controls

Chainalysis says that the potential of AI technology to scale crypto scams exponentially further adds to the challenges associated with combating those crimes. 

Tackling crypto scams at scale will require sustained efforts from government agencies, regulators and organizations, the firm said.