Beware of the "pig butchering" scam: a growing threat to your privacy and finances

Evelyn, a 50-year-old navigating Los Angeles' tough dating scene after heartbreak, met Bruce, a charming, well-dressed man on Hinge. Their online romance deepened, but Bruce revealed a darker motive – convincing Evelyn to invest $300,000 in a fake crypto scheme. Later Evelyn discovered Bruce was just a ghost, part of a global fraud network. 

This alarming story, featured by Wired, highlights the rise of the "pig butchering" scam, a sophisticated fraud that preys on emotional connection to exploit victims financially. Victims lose hundreds of thousands of dollars, as scammers manipulate them with promises of lucrative investments.

At Taxes for Expats, we aim to protect our clients from such threats by shedding light on how these scams operate, why expats are particularly vulnerable, and what steps you can take to safeguard your finances.

What is the "pig butchering" scam?

The "pig butchering" scam is a long-term con where fraudsters gain a victim's trust before defrauding them of their money, often through fake cryptocurrency investments. 

The name "pig butchering" originates from the analogy of fattening a pig before slaughter – scammers cultivate trust and emotional connection over time before making their delinquent move.

How the scam works:

1. Initial contact: Scammers usually reach out via dating apps or social media.
2. Relationship building: They invest weeks, months, or even years in building trust, often posing as a romantic partner or a friend.
3. Introduction to investments: The scammer encourages victims to invest in what appears to be a lucrative opportunity, typically in cryptocurrency.
4. Fake returns: Victims see "profits" in a fake investment account, luring them to invest more.
5. The big final theft: When victims attempt to withdraw funds, scammers claim taxes or fees must be paid upfront. At this point, the money put into the investment account is already lost and the taxes to be paid are the final attempt by the scammer to steal money. 

Living abroad can increase your vulnerability to online scams. Expats often turn to online platforms to build social connections and communities, making them more likely to engage with strangers. Additionally, recovering lost funds becomes especially hard when scams involve cross-border transactions.

Tax implications of the "pig butchering" scam

Scammers often exploit tax language to steal even more money. For example, they tell victims trying to withdraw funds from the fake account to pay taxes on their gains. 

This tactic not only deepens the financial loss but also creates confusion about legitimate tax obligations.

What you need to know:

• Taxes are never paid directly to an investment platform or a third party. They are remitted to the US Internal Revenue Service (IRS) or other countries’ tax authorities through proper channels.
• If anyone demands upfront payment for supposed "taxes", it's a scam.

Losses from theft – including scams like "pig butchering" – are not deductible as casualty or theft losses under current tax law. This limitation was introduced by the Tax Cuts and Jobs Act (TCJA) and is in effect from 2018 through 2025. 

However, there may be exceptions for specific situations. Consulting a tax professional is crucial to explore potential options and stay informed about changes that may impact deductibility.

How to protect yourself from the "pig butchering" scam

Recognize the warning signs

It might be hard to recognize the warning signs from the very beginning, since a scammer will build trust with you first. 

Not everyone in the dating app will want to steal your money. But if you haven’t had an in-person date yet, and the conversation starts to take the directions mentioned above, it’s a huge red flag.

Take proactive steps to safeguard your finances

Scammers often create convincing fake platforms or pose as credible financial experts to lure victims. Before committing any funds, take the time to investigate the platform's reputation and credentials, and consult a tax professional or your financial advisor. 

Even if you are not the kind of a person who tends to quickly lend credibility, set this as a rule:

Never share personal information – such as Social Security numbers, banking information, or passwords – with individuals you’ve met online.

You can also contact the appropriate authorities in your country of residence:

• Australia: Report cyber scams and phishing incidents to the Australian Cyber Security Centre (ACSC) through their ReportCyber portal. For additional support, contact IDCARE, Australia’s and New Zealand’s national identity & cyber support service.
• Canada: Report phishing and cyber scams to the Canadian Anti-Fraud Centre. For additional support, contact the Canadian Centre for Cyber Security.
• France: Report phishing and cyber scams to the Internet Signalement Platform. For further assistance, contact your local police station or the National Gendarmerie.
• Germany: Report cyber scams and phishing to the Federal Criminal Police Office (BKA) via their cybercrime reporting portal. You can also contact your local police station for assistance.
• Japan: Report phishing and cyber scams to the National Police Agency's Cybercrime Consultation Desk. You can also contact your local police station for assistance.
• New Zealand: Report cyber scams and phishing to CERT NZ. For further assistance, contact your local police station or use the 105 Police Non-Emergency Reporting service. For additional support, contact IDCARE, Australia’s and New Zealand’s national identity & cyber support service.
• Singapore: Report cyber scams and phishing to the Singapore Police Force Anti-Scam Centre. For further assistance, contact the Cyber Security Agency of Singapore (CSA).
• Spain: Report cyber scams and phishing to the Cybercrime Unit (Unidad de Investigación Tecnológica - UIT).
• Switzerland: Report phishing and cyber scams to the Cybercrime Coordination Unit Switzerland (CYCO). For additional support, contact your cantonal police.
• United Kingdom: Forward suspicious emails to the National Cyber Security Centre (NCSC) at report@phishing.gov.uk. Report fraud and cybercrime to Action Fraud via their online reporting tool or by calling 0300 123 2040.

What to do if you’ve been scammed

If you find yourself a victim of a "pig butchering" scam, here’s what you should do:

Taking these steps does not guarantee recovery of lost funds, but they are essential for responding to the scam and protecting yourself from further harm.

At Taxes for Expats, we’re here to provide support and guidance as you navigate your financial and tax responsibilities abroad. If you have questions or concerns about tax frauds, contact us.

Stay safe and secure, wherever you are in the world!