Representative image for financial fraud.
Credit: iStock Photo
In the previous part of this series on cyber frauds, the focus was on UPI, credit and debit cards and ‘fedex’ scams. However, there are other kinds of frauds which are even less understood by the unsuspecting public.
One of them is unceremoniously known as the ‘pig butchering scam’ and targets people by inducing them through the promise of high yield investments in cryptocurrency and similar digital assets. There are also the good, old, loan scams.
Scams via loan apps involved charging irrationally high interest rates like 40%, or disbursing only part of the promised loan amount due to ‘processing fees’ but harassing customer to repay full amount in 7-10 days, or accessing and leaking the customer’s personal information until loan is repaid or even public humiliation by alleging the customer indulges in pornography and prostitution.
However these scams have dipped after the government cracked down on shady loan apps by removing about 2200 fraudulent loan apps from the Google Play Store.
Meanwhile, the crypto frauds are so recent and complex, that even the authorities have no response against such threats.
How do pig butchering and crypto scams work?
Unfavorable and cruel as it may sound, it’s called a pig butchering scam because it is like fattening up a pig before slaughtering it. The victim is the ‘pig’ who will be ‘slaughtered’ by way of financial and mental ruin.
The scammer finds and befriends victims on a social media, dating, or matrimonial platform. Next the victim is made to feel emotionally safe and vulnerable enough to move the conversation to a messaging app. Once the messaging is personal and intimate enough, the scammer will float the idea of investing in a ‘high investment opportunity’.
Typically, it is a crypto exchange platform that the scammer will say has yielded ‘great returns’ in their personal experience, so the victim should try investing too. The scammer might even share fake screenshots as evidence of their personal crypto investment yields.
This is a common method to get victims to invest in fake crypto projects. Unlike with fiat money, scammers can get away with more lies since most people don’t understand how cryptocurrencies, blockchain or the underlying infrastructure works, and how that entire asset class operates.
Crypto scams can also be pulled off by scammers posing as financial gurus and fin-fluencers who encourage their followers to sink money in such schemes.
At first the victim would see their crypto investment raking up high returns. Then the scammer will convince the victim to continually increase the amount invested. Then one day the victim realises that either there is a glitch in the ‘cryptocurrency platform’, their account on the exchange is frozen or they cannot withdraw any money.
By this time the scammer has also vanished, typically blocking their phone numbers and social media or dating profiles.
Educating people about such scams
Loan app victims typically have a lower income, little savings, and urgently need a few thousand rupees. The latest figures from Fintech Association for Consumer Empowerment (FACE), an industry body of fintech lenders, says that in the October-December 2023 quarter, the average loan size was Rs 11,945.
If you’re looking for a quick loan, be sure to understand the repayment timeline and the interest rates. Do not take loans from just any app before reading user reviews. Desperation cannot replace financial discipline.
Victims of crypto scams often don’t understand how the cryptocurrency works. Currently there are over 9,000 cryptocurrencies, each operates differently and thorough research is a must. Don’t believe people that message you online about investment schemes on obscure websites.
Finally don’t be eager to please a potential romantic or life partner by rushing to sink money in investments they recommend. Nothing is worth risking all your hard earned money or worse, borrowing to invest in some shady crypto project.
Something that civil society and interest groups have been asking for is a public database of scams and known scammers maintained by central or state governments, that people may refer to. For example, the California state government has a crypto scam tracker.