How Do Crypto Flows Finance Slavery?
The Economics of Pig Butchering?
John M. Griffin & Kevin Mei
Discussion by Katya Malinova
DeGroote School of Business
McMaster University
4th Annual CBER Conference
NYC, May 23, 2024
The Sha Zhu Pan (Pig Butchering) Script
UN REPORT 2023:
- ≥ 120,000 people in Myanmar & ≥ 100,000 in Cambodia
- “may be held in situations where they are forced to carry out online scams.”
- “may be held in situations where they are forced to carry out online scams.”
- scam industry in one (unnamed) Mekong nation alone “may be generating $7.5 to $12.5 billion”
What does it have to do with slavery?
Key [press] take-aways from the paper
The $75.3 billion number
FBI Internet Crime Complaint Center Report (IC3)
Investment: $4.57B
Business Email Compromise: $3B
...
Confidence/Romance: $0.65B
Crypto-related totals: $5.6B
The $75.3 billion number
$26B Total Crypto Scam Revenue in 2020-2023
The $75.3 billion number: Tracing
Reported Scammer Address
focus on Ethereum paths that start from exchange wallets sending funds
to scammer addresses and end at user deposit addresses
The $75.3 billion number
Reported Scammer Address
"Deposit Addresses"
at Exchanges
Concern 1: "tool includes proprietary
criteria to terminate a trace path if funds reach an address that is unlikely to be a scammer"
"Deposit Addresses"
at Exchanges
Deposit Addresses
at Exchanges
"sum all inflows to these addresses and find $75.3 billion"
Concern/Question 2: addresses may belong to entities that service other (illicit?) activities?
- Illegal gambling?
- Avoiding China Capital Controls?
Question 3: How much money EXIT the exchanges?
Comment/Concern 1B:
- collect 1,065 addresses
- the United States
Institute of Peace (USIP) shared a large set of additional addresses - "apply screens"
- → 4,728 addresses
Comment/Question 4:
- The scam tactics have evolved
- No longer "send money to the [scammer] address"
The scammer tactics are evolving → no "scammer" address to send the funds to
- 2020: use Apple iOS and Android applications; bypass app store review
- 2022: place apps into the Apple App Store and Google Play Store, bypassing application security reviews
- 2023: DeFi Scams
- Legitimate apps and wallets (Trust Wallet)
- tools launched from within the wallets
- smart contracts that give the scammers access to their targets’ wallets
Sidebar: fraud is nothing new ...
First recorded fraud: 300BC
Key takeaways revisited: is there a path forward?
?
TRACED!?
Crypto (+AI) does allow scams at scale .... but
More broadly: cybercrime costs: in trillions!
World Economic Forum:
- growing cyber inequity
- the highest barrier to cyber resilience is transforming legacy technology and processes.
Role for blockchain?
Costs vs benefits of decentralization?
@katyamalinova
malinovk@mcmaster.ca
slides.com/kmalinova
https://sites.google.com/site/katyamalinova/