Fraude en Internet | Legal Lunch Byte | Episodio 10

well hello everyone and welcome to the Legal Lunch Byte episode 10 today I will be chatting with my my colleague Arlo Kipfer colleague of mine at Harris Sliwoski, Arlo welcome and welcome to the show thanks Fred it’s good to be here and before we we get uh things started with the topic for today which is internet fraud um could you take a minute to introduce yourself sure um as you said my name is Arlo Kipfer I am an attorney um how I got into this topic was I I lived and worked in China in Asia greater Asia for 16 years and uh a lot of this this particular uh scam this the scammers come out of mainland China and so my my research and my work led me into do due diligence investigations when I first started encountering clients who had this problem excellent and you know I’m sure I’m sure many of us have uh horror stories about the topic whether because of things we experienced personally or because of things that that those we know experienced um but but I I think there is there is something um particularly dramatic about seeing it happen to someone that you you really thought wouldn’t wouldn’t fall for for these scams right because we read about them and then we we hear about people that in in theory should should have known better but when when it happens to someone that you know for a fact should have should have known better then it’s it’s all the all the the more impactful so we’re hearing this term you know Pig butchering scam uh different variations um it’s becoming quite mainstream although for us who work in the China space you know we we got uh advanced notice perhaps of of of this uh terminology but but what’s this pig butchering thing yeah so it’s this particular version of an online romance scam is kind of what happened and I think ever since the worldwide web has come in existence and there were um uh dating sites and things there was always a version of this out there but this particular version called the pig butchering scan um what it is it’s been very effective in um being able to in snare victims and really take them for all they were worth um which makes it unusual it’s not just like $1,000 doar here or $5,000 it’s pretty uh Insidious and um in clever it plays on the psychological psychological Tendencies of human beings to trust others and so essentially what this the scam is is it starts out and it’s called Pig butchering scam is because the goal is to fatten up the pig um which means send all the money and at some point whenever the person has no more money or they figure out it’s a scam then just to cut cut off all the communication and they generally the scammers generally find victims and reach out by as I said through a dating app now it’s quite common for people to use dating apps to find um a significant other uh they’ll reach out through Linkedin maybe they’re looking they they build a LinkedIn profile that poses them as a young professional seeking a mentor and they look for someone in their field you know maybe someone who’s a senior executive or recent retiree says oh I’d love to put my skill to use and Mentor this person um and or maybe the innocuous text message which I’m sure we’ve all received it says hello or as I got last Thursday it says hello is this Miss Anna is the bag I ordered now in stock I have time tomorrow I can come and get it and so they make these initial contacts and with the phone messages they just looking for someone to engage and and humans are we tend to be most people tend to be nice and they say oh I’m sorry I don’t know who you are or I’m not an and uh and once they engage the scammers will you know build a relationship something like oh you’re so nice or um and then in the context of LinkedIn or on a online dating app they will start having a little banter it’s all very playful and at some point um they say hey let’s take this conversation to WhatsApp um typically WhatsApp it could be line or something else but normally it’s WhatsApp and probably because it’s harder to trace where the where the conversation is coming from from and then they build a relationship um and they will build usually it’s romantic but sometimes it’s just platonic um they build a relationship they talk about they’ll have a conversation about what they’re eating what they’re wearing they’ll send pictures of themselves not surprisingly they’re usually very attractive people um and most people can’t believe it they got so lucky uh and um and it’s it hits males and females they have people posing as Asian men or Asian women or European men or Russian men or Russian women and um they just build this conversation and at some point and they’re patient the scammers are quite patient sometimes they’ll wait a month and we’re talking like dozens of text messages a day for a month at some point they mention the some investment they’re making um maybe it’s foreign exchange trading or maybe cryptocurrency exchange trading and it’s they just kind of casually mention it um that they’re doing it to see if their interest and many many people um want to get rich richer than they are now have more money and they think wow this is my opportunity maybe I missed out on the big crypto boom or I heard you can make money on Forex but I didn’t know how or this is this surprised me a bit they sophisticated Forex Traders and cryptocurrency Traders that get ins snared by this they are like wow this is an edge they understand the market and ultimately what they do is they by just kind of mentioning it and then there’s an interest it almost looks like the victim is the one that’s kind of asking to get in on the action so it’s it’s a very good psychological Ploy you don’t feel like you’re being pushed on something pushed to do something and then at some point they say well if you want to get on it I have a usually it’s an auntie or an uncle that’s connected somewhere that has some information about some big trades and if you want to throw a little money in on it you could make some money together and the victims usually say that sounds like a great idea and so this there’s usually two versions of this one is the I send open account at coinbase or some crypto legitimate exchange and then send that cryptocurrency to wear to some other cryptocurrency exchange that where you can make these so-called trades or you wire money somewhere uh to a bank account and that money shows up in your um your client software on the Forex site and this they usually use metatrader 4 or metatrader 5 which is a legitimate software and the scammers build a fake exchange website but put use legitimate software so the users can go to Apple store or Android Store and download metatrader 5 or get it off the online which is a legitimate app and they can plug into this fake website and it all looks very legitimate make their trades they see of course it’s being manipulated by the scammers on the back end whether it’s crypto or whether it’s uh Forex uh software and the scammers say okay now you need to trade right now and they make their trade with their $500 or ,000 IAL thing and they get that $1,000 turns into like $122,000 immediately and then they do a few trades like that experiencing big gains and and then the scammer usually says hey why don’t you send some more money you can make a lot more money and that starts a series of progressions where they send more more and more money pretty soon people are sending $100,000 they’re cashing out their 401ks they are borrowing money from families they’re taking second mortgages and um and of course they’re seeing enormous games these are people who maybe’s net worth isn’t that much but they have they now they have like five or $6 million doar showing in their account inevitably they want to cash out of course and sometimes the scammers they’re they’re quite good um they’ll let you take like a $500 out just to show that you can or $1,000 or maybe even $10,000 if you’ve been sending big amounts over and that gets your confidence so you continue the game and ultimately at some point most people get enough they’re like wow I’m I’m set for life with this money I want to cash out and at that point they find out they that that they the scammers have a whole scripts whole bunch of scripts they use they say oh you have to pay capital gains tax so send some more in or your account’s been frozen from money laundering you need to send some more in to show that it’s not money laundering or maybe uh you you know or they or they manipulate the The Exchange to show a massive loss so you lost everything and maybe you’re in the hole and you need to send more money so that’s basically what the scam goes and until they until the person says I don’t have any more money I don’t have any more money to send then then the end of the line goes silent and the big has been Pig has been butchered yeah um yeah certainly we wouldn’t you know no one would want to be at the end of at the end of that line so so basically this this is a a particular a particular uh type of scam but like you said this is this is ever since the internet um came into existence there have been internet scams and even before that there were scams of of other sorts right um but but this one obviously has some some partic particularities um maybe um many questions that that I have but but maybe let let’s let’s start with this um what is one very egregious example of losses that that you’ve you’ve heard about or you know one or two examples of um uh situations where where someone has you know someone that you’ve spoken to in the during the course of your work perhaps um what are some of those most um shocking examples of of someone falling to either the the pick butchering scam or or or some other form of of Internet fraud it’s a good question well I mean I’m just thinking of so many cases I’ve had I’ve had people who are who worked on Wall Street for 20 years who should know how markets work fall for it I’ve had people who build a successful Empire you know fantastically Rich smart businessmen um it’s it’s people with phds attorneys you know attorney lost $5 million you know there’s just many I I I I hesitate to go into too much specifics because of the people involved but the reality is is um it doesn’t necessarily it’s not like people are that are doing it are not don’t have any education or they’re dumb and they’re people that are that don’t have a lot people called me and they’ve lost $55,000 and they want to see what they can do to recover their $5,000 and we’ve had people who’ve lost five and a half million or6 million and um and and and just I mean I think the one that’s most tragic for me was this lady who was um just a few months from retirement um and she sent everything she had she had a a like a second mortgage line of credit that she hadn’t used for like 20 years she sent all of that um cash everything and then the worst one of the worst things too is when this happens and they when she finally had no money left then she the scammers went silent and then she found out that the next year she’s GNA have to pay capital gains tax on all the money all the Investments she sold you know so not not only did she have NOA money now she has this huge tax bill from the IRS because she sold her Investments early and withdraw her 41k early it’s just devastating and these people um yeah it’s it’s it’s hard to take some of these calls that that we get on this yeah one of the most dramatic cases that I dealt with involved um a a well-known company um and what had happened was the one of the officers you know let’s say the CFO perhaps um had received an email uh from someone claiming to be her her boss and uh asking you know I need this information very you know right away how much money do we have in our in our current account um and you know again psychology she gets caught into in that Dynamic like well maybe maybe that’s the way she and her boss communicate like he has you know these uh rapid fire questions wants to move things quickly and and basically what what was what she was told was there’s this um big transaction has to be kept quiet you know we can’t we can’t let this you know uh become public so what I need you to do is very quietly send you know x amount of money almost $1 million yeah to um this account um and and and she did and um of course you know must have been a very awkward conversation with the boss a little bit later like listen I did what you wanted me to do and he’s like what what are you talking about um she she lost her job as as as a result of that and um but but if you you know and when I was looking at the at the emails um I was thinking this this wasn’t that difficult to set up right I mean it wasn’t it wasn’t it wasn’t that difficult to to figure out that this was a a shady email address from you know this so um very sad to see that right the both in terms of how the amount of the losses but also how easily preventable this would be in in some cases um obviously crypto has played a big role in all this right I mean that that has certainly added an and you twist to to things is that right yeah crypto has for sure it’s made it it’s facilitated it’s easier and it’s been harder to track in some ways harder to track than bank wire transfers and some way easier because the blockchain’s public but some way harder I think Fred one of the things that I wanted to cover is you know what what you can do if this happens to you um and first of all I encourage everybody to spread awareness about this my my own goal and I think a lot of us that are understand and want to fight against this the goal is to make this so well known that it’s like the Nigerian prince you know wants to get his gold out of Nigeria scam that happened in the mid 90s or whenever the internet came along at the time people were fooled by it now nobody would even give that email Second Glance right um and so when we get these inaccurate text messages or or a dating app person seems too good to be true it wants us to flip over to Whatsapp that we we know it’s a scam um but the big thing is is to file I encourage everyone who has happen to to file an ic3 uh complaint with the FBI this is an internet crime complaint center um contact law enforcement whether it’s your state attorney general or local law enforcement um then if you if you want and what people can do is hire attorneys and what we do is we try to use the legal system to freeze accounts or whether the crypto wallets or bank accounts where the money has been sent to to see if you know there’s still balances in there and and the scammers have been known to be sloppy and leave money in and we have Frozen accounts for clients before and try to get that back using the legal system so um but yeah spreading awareness is the big thing that I I really want people to do that’s uh that’s a great way to to bring this to to an end you know with with a on a more positive note and also helping like you said I think I think that that encapsulates it perfectly we we want people’s awareness to get to the point where you just know right away that this is something that there’s no question right uh that this is that this is fake so with that you know this this went by time flew today uh because it was a good conversation so thank you Arlo for joining us and for everyone else uh we’ll be back next week with another episode of the legal lunch fight thank you thank you Fred thank you