Crypto 'pig butchering' scam wrecks bank, sends ex-CEO to prison for 24 years
cnbc.com
cnbc.com
It’s interesting that this one guy gets 24 years over 47 million dollars. Yet, not a single executive, board member, VP or SVP got arrested for the fraud that lead to the 2008 crash. We are talking orders of magnitude more than this and they declined to prosecute even though the evidence was absolutely abundant as we now know.
This guy doesn’t deserve any sympathy but it should be known that he’s hardly the most egregious financial criminal walking the streets. That honor goes to Jamie Dimon of JP Morgan Chase.
edit: at the very least, they should have fired all the executives from the banks, and their boards, and stripped them of their compensation packages, and clawed back anything they earned in that time period, and banning them for life from working in the financial sector in any capacity ever again. That would have been more appropriate than jail time and sent an actual message to Wall Street that this behavior won't be tolerated.
My understanding was more that things were disclosed deep in the fine print, and nobody really verified anything and didn’t have a legal obligation to do so.
Who allegedly lied to the point of it being fraud in 2008?
The most egregious stuff in 2008 was mispricing MBSs. Incorrectly pricing risk is pretty far from stealing money from investors/depositors.
But then you have to ask if the institutions doing the application verifications were criminally negligent.
"The American Law Institute’s Principles of Corporate Governance defines the duty of care as the duty by which a corporate director or officer is required to perform their functions in good faith; in a manner that they reasonably believe to be in the best interests of the corporation; and with the care that an ordinarily prudent person would reasonably be expected to exercise in a like position and under similar circumstances (negligence standard)."
https://www.law.cornell.edu/uscode/text/15/80a-35
That's just one example. I expect that, had they wanted to, the government could have found many applicable laws to go after those responsible for the financial crisis.
That wasn't negligent. It was intentional.
Not by the institution, but by the officers acting against the interests of the institution.
A tiny example out of so many: it is against the interest of a secured lender to inflate appraised value or allow them to be inflated.
Yet, starting at 2004, appraisers across the country started reporting that they were being pressured to inflate appraisals and blacklisted when they refused.
This is clear indication of fraud against the institution and regulators. There is simply no honest reason to inflate appraisals.
The institution made a bunch of money. In the ghoulish way banks behave, the institutions interests are only making money. The officers were acting in the interest of the institution the way they understand them.
You would need to classify everything from consumer reports to industry awards to not inviting influencers who give negative reviews to events as stealing as well.
> Another email between colleagues at Standard & Poor's written before the bubble burst, suggests awareness of what would happen to the securities they were giving top ratings to: "Rating agencies continue to create and [sic] even bigger monster--the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters."
They were willing participants precisely because they were making huge fees to look the other way.
> One study of "6,500 structured debt ratings" produced by Standard & Poor's, Moody's and Fitch, found ratings by agencies "biased in favour of issuer clients that provide the agencies with more rating business. This result points to a powerful conflict of interest, which goes beyond the occasional disagreement among employees."
These kinds of things are deals negotiated at the highest level of the companies involved. Credit agencies were paid to give the crime the banks were doing a veneer of respectability.
To me it just seems a more or less natural outcome of the major structural flaws in the whole business model. I’m not sure you need an explicit conspiracy for credit agencies to begin behaving in such a way that maximizes their revenue, it was mostly just a natural outcome of competition and extremely useless and inefficient regulation. If anyone deserves to go to prison it’s the people who were supposed to be regulating the banking industry.
Obviously the Federal government had zero interest in doing that but if they only went after the bankers it would have quickly become obvious that they are not the only ones to blame.
If you can actually draw a distinction between what scammers do and what companies do other than “we explicitly have laws on the books to treat it as a crime” I’d love to hear it. There’s a lot of similarities between corporations and criminal organizational - it’s just groups of people who are trying to make money.
And as for who deserves to go to prison, the ratings agencies refused to pay market rates to retain talent being poached by the banks. The same happens in government. So basically the banks continually poach the best people and create incentives to keep the status quo and for regulators to turn a blind eye so that they can land at the bank later. You can go after the regulators but I don’t think that’s going to be an effective strategy to solve the problem.
Yeah but IMO the scam part is mostly tangential. It hardly matters what did the CEO do with the stolen money, he could have gambled it away at a casino or bought a yacht with it, at the end of the day he still stole it and that’s the crime we’re discussing here.
> You can go after the regulators but I don’t think that’s going to be an effective strategy to solve the problem.
Yes, but going after the bankers would have exposed the extreme incompetence by the regulators and if you started unwinding the whole thing it would have affected a lot of high level people in government. So it’s rather obvious that that they had very little desire to prosecute anyone.
And it hardly matters who deserves what since you can’t send anyone who was just exploiting loopholes and didn’t clearly brake any laws regardless how immoral or unethical their actions were.
Yea, probably there was invidual cases of bribing like in all industries. But overall the issue wasn't oughtright bribes.
I know, I know. Requiring conspirators to say "this is a bribe" for there to be legal jeopardy is sort of nuts.
>for a fraudulent and deceptive scheme to package and sell residential mortgage-backed securities that the bank knew contained a material amount of materially defective loans.
If that's not enough, if we want to look just beyond 2008, they pulled a scam to manipulate the part of the settlement which was suppose to 4 billion in loan relief for home owners[3] by forgiving phony mortgages.
I have more, if so desired, but I didn't want this to turn into a hundred link dump of information that would be very dense to read.
[0]: https://www.vanityfair.com/news/2017/09/jamie-dimon-billion-...
[1]: https://www.thenation.com/article/archive/jamie-dimons-13-bi...
[2]: https://www.justice.gov/iso/opa/resources/943201311191510319...
[3]: https://billmoyers.com/story/special-investigation-americas-...
>Reuters has found that some of the biggest U.S. banks and other "loan servicers" continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.
>In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts. Reuters also identified at least six "robo-signers," individuals who in recent months have each signed thousands of mortgage assignments -- legal documents which pinpoint ownership of a property. These same individuals have been identified -- in depositions, court testimony or court rulings -- as previously having signed vast numbers of foreclosure documents that they never read or checked.
https://www.reuters.com/article/world/special-report-banks-s...
[1] https://fcic-static.law.stanford.edu/cdn_media/fcic-testimon...
Can you show the abundant evidence that is available, and who committed the crimes you think they did and which specific crimes you think these individuals committed?
- which specific people do you think committed crimes?
- which specific crimes do you think they committed?
- what evidence do you have of these crimes linked to these people?
- bonus question, given how mad the US was at bankers post 2008 and how hard prosecutors tried to link people to crimes, nothing came out of this, why did prosecutors fail to find any data to charge people?
I wish I knew why they decided not to pursue such a rock solid case, but by 2013 it seems they reversed course on being 'hardline' in dealing with the banks.
This still doesn't excuse the fact the executives and board weren't held criminally liable, or at the very least all fired and banned from ever working in any part of the financial sector ever again, and stripped of their golden parachutes and money clawed back that they made during the time period.
[0]: https://www.vanityfair.com/news/2017/09/jamie-dimon-billion-...
Nor did any of the millions of Americans who lied on mortgage applications, and took out mortgages they couldn't possibly afford to pay back. Nor was anyone ever held liable for income tax on forgiven debt or the imputed income from living rent-free in houses for years until the court foreclosed.
This sort of thing has existed for a long time, but this term makes it sound like something that is new or novel. Feels like the media is doing a bit of... "headline engineering", here.
But the distinctive characteristic of the new model is to operate at large scale with human trafficking.
Much like how "419" or "Nigerian prince" refers to scams coming out of a specific region.
419 refers more to a type of scam than a region. In some ways, it's almost synonymous with "online scam" these days.
The name simply originates with Nigeria, and continues to associate with it due to the sheer scale of online scams coming out of the region.
<https://web.archive.org/web/20050308040611/http://www.nigeri...>
Much as with other toponyms, the origins are in fact region-specific, though the term has become more general with time.
The generic term is "advanced-fee scam":
Maybe ingest the entire comment you're replying to first. Especially if you're simply going to agree with me in the very next point:
> though the term has become more general with time
The UN estimates that in Myanmar alone, up to 100,000 people are being trafficked to staff the call centers involved in these schemes. https://www.dw.com/en/how-chinese-mafia-are-running-a-scam-f...
That being said it's not just Chinese people targeting overseas people. Chinese people are also often targets of pig butchering. The problem is so bad that a movie was made about it in China and earned $500M at the box office. Given that China heavily censors its media market, it is no secret who is doing what. https://en.wikipedia.org/wiki/No_More_Bets
The image that this evokes in the minds of people that have experienced this is a big barbecue where various cuts of meat are feasted upon for a long time, maybe all day. It's a joyous event of unbridled gluttony. The guests must consume all of the un-preservable meat right away, which means if you attend one of these events you get to stuff your face with delicious, delicious pork for several meals, not just one.
To understand the origin of the "pig butchering" scam name, consider that most scams are one-offs. The scammer tricks the victim, the victim loses maybe a few thousand dollars, and learns "not to do that again". With pig butchering, the victim is tricked into feeding their money repeatedly into a fake "investment" application, which allows the scammer to "feast" on them for a long time, like at a pig butchering event.
Similarly, many long-cons take time to set up, but are still one-off thefts. That's not the same as convincing someone to repeatedly put thousands of dollars into the stealing machine.
Assigning specific (and colorful) names to scams/cons has always been a thing. See
- Pig in a poke https://en.wikipedia.org/wiki/Pig_in_a_poke
- Spanish prisoner https://en.wikipedia.org/wiki/Spanish_Prisoner
- Badger game https://en.wikipedia.org/wiki/Badger_game
- Coin smack https://en.wikipedia.org/wiki/Coin-matching_game
- Pigeon drop https://en.wikipedia.org/wiki/Pigeon_drop
And anyway, the name seems to come from the scammers themselves in China, so I don't know why the media would be to blame.
I think both things can be true - the term originated from Chinese and became a common term in that region for long conning people over the internet, sure. But, at the same time, the media has also latched onto its use largely for dramatic effect, even when there is no evidence the scammers are Chinese.
Not to this scale, level of sophistication, global reach, ease of finding victims and the scammers being victims (of human trafficking) themselves. Using crypto, human trafficking to force people to contact victims nonstop, having scripts and actors, legitimate-looking websites showing fake profits is new and novel.
Now add AI into the mix, along with large-scale data breaches - would not be surprised if, by 2030, the majority of individuals over 60-70 years old are contacted by at least one very convincing scammer that the victim will have difficulty distinguishing from an actual family member. It's already happening - only a matter of time before it's more widespread.
It reminds of people to not be the 'pig' to be butchered, to know that their greed or lust could be manipulated by an organization behind that screen, and that they are a pig walking into a slaughterhouse willingly.
- Finding marks by sending out text messages which have the appearance of being a normal message sent to the wrong number, and which invite a response.
- Building a long-term relationship with the mark over text messages.
- Eventually convincing the mark to invest in a fake crypto exchange.
- The fake crypto exchange delivers small wins for a while
- Eventually convincing the mark to make a very large investment.
- Then the money disappears.
- The scam is run by Chinese operators in an illegal call center in Myanmar using human-trafficked labor.
This obviously has characteristics that distinguish it from a generic scam.
Example of a scam that is not pig butchering:
- I got a text message offering me $XYZ/day to drive around town with a Colgate toothpaste ad on my car
- If I had accepted the offer, they would have asked me to send in a downpayment for the ad materials, then they would have vanished
> Hello Manny. My customized tennis racket has arrived. I want to play a tennis match with you. I have a hunch that you are no longer my opponent. When do you have time?
I imagine they want to get you into a conversation and pitch a crypto scam.
The difference between running a scam and running a failing business is just a matter of intent, which is hard to prove.
Perhaps in some cases but "running a failing business" becomes fraud when you start lying, even if your intentions are "good".
You have to prove they lied. I.e. that they knew they were defrauding customers, which goes to intent. Though I suppose it could be lying only later, in the cover up -- if Logan was stupid/lazy enough to trust dishonest people to build his game then deny or renege on refunds.
Regardless I imagine we'll find out soon as he sues CoffeeZilla since he may be countersued or be otherwise unmasked in discovery. CZ already has videos of Logan saying CZ is a stand up guy who does good reporting.
People like this ex CEO go to prison all the time. Stateside scammers misrepresenting why they’re getting their victim to wire things go to prison all the time.
In this case its not proven that anyone knows who the scammers are, or where they are. Its just as likely that they are pig butchering the bank account owners in those other countries too.
Now, Logan Paul? You have to also realize when some communities use the word scam far too liberally. Naive people losing money trying to flip something thats not an investment, and failing, doesn't make it a scam involving any legal sanction. Even if it was an investment, properly registered, that just protects the promoter even more.
That's true! People are calling an overpriced garbage dlc a scam nowadays, and that's just not true. It's exactly what it says on the label, so it's definitely not a scam, unless the marketing was very disingenuous.
But what Logan Paul did is not an example of that. It was not an investment that didn't pan out. It was an orchestrated pump and dumb scheme that was centered around a product, which he never delivered on.
You'd have grounds to argue if the game was delivered - but as it stands you cannot call that anything but a scam
Let this be yet another painful reminder to the rest of us that diversification of your retirement funds is critically important. Putting 70% of your life savings into one investment leaves you with the stark possibility of surviving off only 30% of what you spent a lifetime saving.
> “He said, ‘Brian, I’ve got this money and it’s in cryptocurrency, and I need $12 million to help verify the funds.’
What?
I've heard that scam victims often double down and put on blinders, because the alternative would mean they were being scammed and they don't want to accept that. But man, those are a huge pair of blinders.
It scares me a bit: I think I'm smart enough, and not greedy, to fall for this kind of scam. But I suppose many people that fall for scams also think they're smart (I wonder if they think about whether they are greedy?). Often they are hit at a time in their life when they are vulnerable. So can I really be sure of myself?
Likewise, I think of my elderly parents - I tell them how to look out for these scams, and all the warning signs, and they understand, but maybe there's a moment where the scam might work on them long enough.
I think the common case in a lot of these scams is that people operate by themselves at the beginning (that's a vulnerability the scammers exploit). So a good defence is to have a trusted family member to share all money matters with.
I haven't been scammed, but I've been tricked by the cops into saying something in a certain situatoin I shoudln't have, even though i was a long-time ACLU member who thought I was an expert in your rights and best practices not to talk to cops! they're just really good at tricking people, they've been trained in it. As of course have scammers.
Still... this one seems especially wild. What banker could think any legitimate financial instrument required you send to millions more to "activate"? Although I guess once you're in for $10 millionn, your incentive to avoid admitting you've been scammed is even higher? And I guess maybe "cryptocurrency" is something nobody actually understands but just seemed like magic money -- but what is a BANKER doing investing millions in a financial product he doesn't understand at all? It's pretty embaressing.
And of course that's without even talking about the greed and complete abuse of money that wasn't his in a small town where literally knows the people he's stealing from of course. But just the sheer stupidity about financies from a banker. Like I wouldn't be shocked other people would fall for this, but a banker believes that this can possibly be a legitimate financial instrument and not a scam?? Maybe those scammers were really really good.
There is little reason to assume the CEO in fact didn't orchestrate this whole purported "scam".
There are bank accounts in random countries he goes to visit or thinks he needs to visit, and an article saying money from the bank is wired directly into a crypto wallet, which is impossible. I’ve used institutional OTC desks that convert your incoming wire into a crypto asset and address of your choice at a pre negotiated exchange rate, but that is such a specific thing that you cant accidentally do
No crypto was harmed in this scam
Bank or not, good luck tracing anything through China. Odds are good this could have even been a nation state level scam run by North Korea. They get a lot of funding this way.
Basically, the real scammers have a series of people who have bank accounts, but don't know the true identity of the scammer, and those people receive the wire and transfer the money in some other form.
Often, the "Money mules" don't even know they're part of a crime, and are told they're receiving legitimate money to their personal accounts, withdrawing it, and transporting it somewhere.
Sure, you can track down and try to arrest the money mules, but it doesn't feel great to arrest someone who was only an unknowing participant.
Just try and find a case of fraud that was reported and successfully resolved by the FTC for an average American. I know people who have collectively lost over $1m who have never, and probably will never, see any resolution to their case. Some scams even have public founders and work using traditional financial rails.