‘Everything is fake’: how global crime gangs are using UK shell companies in multi-million pound crypto scams | Organised crime

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A woman meets a man online. They flirt. Then, after a few weeks, they begin imag­in­ing a future togeth­er. Fast for­ward a few months and one of them has had their heart bro­ken and been defraud­ed of their life savings.

It sounds like a clas­sic romance scam, but it isn’t. This is “pig butcher­ing”: a bru­tal, elab­o­rate and rapid­ly expand­ing form of organ­ised crime, often involv­ing crim­i­nal syn­di­cates, mod­ern-day slaves and vic­tims around the world.

Since it came to promi­nence in 2021, the fraud – which involves scam­mers groom­ing their vic­tims before steal­ing huge sums in cryp­tocur­ren­cy – has led to loss­es of hun­dreds of mil­lions of pounds and prompt­ed warn­ings from Inter­pol and the FBI.

Last month, an inquest heard that one UK vic­tim, a for­mer police offi­cer and father from Wilt­shire, took his own life after los­ing about £100,000 – his entire pen­sion lump sum – in a scam bear­ing the hall­marks of pig butchering.

Now, an inves­ti­ga­tion by the Observ­er and the Bureau of Inves­tiga­tive Jour­nal­ism has found that glob­al organ­ised crime gangs are using the UK as a vir­tu­al base for their oper­a­tions – sys­tem­at­i­cal­ly exploit­ing lax com­pa­ny reg­is­tra­tion laws to car­ry out fraud on an indus­tri­al scale.

Analy­sis has iden­ti­fied 168 UK com­pa­nies accused of run­ning fraud­u­lent cryp­tocur­ren­cy or for­eign exchange trad­ing schemes, with around half of these like­ly to be linked to pig-butcher­ing scams.

Reg­is­tered to address­es includ­ing an emp­ty shop in Croy­don, a flat above a Chi­nese take­away in Som­er­set, and a coun­cil flat in an east Lon­don tow­er block, dozens of the firms share an address, an office or are linked through domain reg­is­tra­tions, indi­cat­ing they may be con­nect­ed. The vast major­i­ty of com­pa­ny direc­tors are res­i­dent in Chi­na.

The com­pa­nies do not appear to have gen­uine ties to the address­es where they claim to be based, and details about the real own­ers are scant. The fact the prop­er­ties have been linked to frauds is often known to the UK authorities.

Yet despite exten­sive evi­dence of fraud­u­lent activ­i­ty, and con­cerns about the poten­tial for earn­ings to be laun­dered via the UK, lit­tle has been done to tack­le the scam com­pa­nies – or to pre­vent new ones from opening.

“This is as big a scan­dal as any of the finan­cial scan­dals that we’ve seen in the last 20 years,” says Gra­ham Bar­row, an anti-mon­ey laun­der­ing expert. “It is an abject fail­ure by the UK gov­ern­ment to have done noth­ing about it.”

Pile of letters addressed to businesses and people the tower block tenant who receives them has never heard of.
One res­i­dent of an east Lon­don tow­er block has been inun­dat­ed with let­ters addressed to busi­ness­es and peo­ple he has nev­er heard of.

The term “pig butcher­ing” comes from the Chi­nese sha zhu pan and refers to the process of slow­ly fat­ten­ing a pig for slaugh­ter. In pig-butcher­ing scams, vic­tims are groomed over a pro­longed peri­od to gain their trust.

The crime became wide­ly report­ed in Chi­na around 2019 but has since spread around the world. In 2021, the FBI received com­plaints relat­ing to cryp­to romance scams in the US that result­ed in $429m in loss­es. In the UK, there is no spe­cif­ic data on pig butcher­ing but, nation­wide, cryp­to fraud is ris­ing rapid­ly. In the year to Decem­ber 2022, report­ed loss­es in all cryp­to scams rose 72% to more than £329m, accord­ing to ActionFraud.

In a typ­i­cal case, a scam­mer, often pos­ing as a young, attrac­tive, wealthy Asian woman or man, begins talk­ing to a prospec­tive vic­tim. Some­times they con­nect on social media, through a lan­guage-learn­ing app, a dat­ing site or via a “wrong num­ber” text. They begin speak­ing more fre­quent­ly, swap­ping self­ies – some­times explic­it ones – and, in some cas­es, record­ing voice notes.

Then, after a while, cryp­tocur­ren­cy comes up. The scam­mer men­tions that they use a par­tic­u­lar trad­ing plat­form or vir­tu­al wal­let and the vic­tim is tempt­ed to try it. What they don’t realise is that this online plat­form or wal­let is fraud­u­lent, and they have hand­ed con­trol of their cash, with­out real­is­ing, to the scammer.

More time pass­es, the con­ver­sa­tion con­tin­ues, and the trust builds. The vic­tim might see a return on their ini­tial invest­ment, and is encour­aged to trans­fer increas­ing­ly large amounts. The “pig” has been fed and fat­tened; now it can be butchered. They are per­suad­ed to make anoth­er trans­fer involv­ing a far greater amount of mon­ey. This time their funds – and the scam­mer – disappear.

One UK vic­tim, Sam*, dis­cov­ered he had lost £54,000 in a pig-butcher­ing scam in Decem­ber 2021. Around a month ear­li­er, the mechan­i­cal engi­neer, 46, had begun speak­ing to “Jes­si­ca”, a New York-based Chi­nese woman in her 30s, after she mes­saged him on Insta­gram. He had recent­ly sep­a­rat­ed from his wife and his father had been diag­nosed with cancer.

After a cou­ple of weeks of chat­ting, Jes­si­ca men­tioned cryp­to. Sam agreed to make a small trans­fer at first, to a plat­form her “friend” rec­om­mend­ed, and then big­ger ones. “I wasn’t try­ing to be greedy … all I was try­ing to do was make a lit­tle bit more mon­ey for a deposit,” he said.

When Jes­si­ca sug­gest­ed he invest more mon­ey, he became sus­pi­cious. A Google reverse image search con­firmed she was not who she said she was: her pho­tos had been stolen from a Japan­ese mod­el. He con­front­ed the scam­mer, who blocked him on What­sApp. When he checked his cryp­tocur­ren­cy wal­let the bal­ance was zero. “I went into the bath­room and just stared at the mir­ror for about half an hour,” Sam says.

More than a a year on, he is still strug­gling to come to terms with what hap­pened. He is yet to get his mon­ey back and does not know if he ever will. He hasn’t told his fam­i­ly about the scam and went a year with­out see­ing his close friends. As he tells his sto­ry, he repeat­ed­ly describes him­self as “stu­pid”.

“Peo­ple will say, ‘What an idiot. How did you fall for this?’ But at the time I thought this per­son was gen­uine, and because I wasn’t in a great emo­tion­al space I fell for it. I allowed the per­son to take advan­tage of me and manip­u­late me,” he says.

Often, the con­ver­sa­tions fol­low a script. Ohio res­i­dent Troy Gochenour, 50, who lost $25,600 and now vol­un­teers for the Glob­al Anti-Scam Organ­i­sa­tion (Gaso), remem­bers being told by “Pen­ny”, whom he met on Facebook’s dat­ing app, that she was afraid to speak on video call because of a trau­mat­ic inci­dent where “she was dri­ving in a car, she was video chat­ting with a friend and the friend got into a car acci­dent and died”. “Lat­er on, I read a script that Gaso had secured from one of the scam­mers and that exact sto­ry is in there,” he says.

Behind the scenes, the indus­try is even more sin­is­ter. Last year, an inves­ti­ga­tion by ProP­ub­li­ca revealed that thou­sands of peo­ple were being traf­ficked from across Chi­na and south-east Asia to work in “scam sweat­shops” run by Chi­nese crim­i­nal syn­di­cates, many of them in the Cam­bo­di­an coastal city of Sihanoukville. Lured by fake job ads, the work­ers are coerced into defraud­ing peo­ple around the world. If they resist, they can face “beat­ings, food depri­va­tion or elec­tric shocks. Some jump from bal­conies to escape,” the report said. The UN’s spe­cial rap­por­teur on human rights in Cam­bo­dia, Pro­fes­sor Vitit Muntarb­horn, likened the con­di­tions to a “liv­ing hell”.

In Feb­ru­ary 2022, Toby*, 32, a UK vic­tim of pig butcher­ing, was defraud­ed out of £115,000 by a woman he met on the dat­ing app Hinge. The day he realised what had hap­pened they were due to have their first date – din­ner at a restau­rant in Ilford.

Instead, he got a mes­sage telling him not to go, and warn­ing him not to trans­fer any more mon­ey. “Every­thing is fake. Your funds … have found their way into the pock­ets of scam­mers,” the mes­sage said. “I don’t want to do [this]. I’m forced to work in a crim­i­nal group. I’m secret­ly send­ing this to you.”

A scam victim who wants to remain anonymous wearing a rain jacket with hood pulled up.
A scam vic­tim who wants to remain anony­mous. Many feel ‘stu­pid’ to have been duped. Pho­to­graph: Andy Hall/The Observer

Key to the suc­cess of pig-butcher­ing scams is con­vinc­ing vic­tims that they are using a legit­i­mate trad­ing plat­form or vir­tu­al wal­let. To do this, crim­i­nal groups set up real com­pa­nies that they can then refer to on their scam web­sites, cre­at­ing a veneer of legitimacy.

Over three months, we iden­ti­fied 168 such com­pa­nies reg­is­tered via Com­pa­nies House – the UK’s offi­cial busi­ness reg­istry – which have been used to defraud vic­tims in the UK, US, Cana­da, Turkey, Ger­many and Poland out of mil­lions of pounds.

Vic­tims scammed using UK com­pa­nies in this way told us that had the firms not been offi­cial­ly reg­is­tered here, they nev­er would have invested.

One, a soft­ware engi­neer from Cal­i­for­nia who lost $536,789 – near­ly £400,000 – in a pig-butcher­ing scam linked to Zion Glob­al Ltd, a firm reg­is­tered in West­on-super-Mare, said the UK sta­tus gave it a “sham credibility”.

“You think you have a way to go after them if they take away all your mon­ey,” he says. “Had this com­pa­ny been reg­is­tered in Chi­na, I wouldn’t trust it. I just wouldn’t.”

Res­i­dents who live at or run legit­i­mate busi­ness­es from the address­es where unre­lat­ed scam com­pa­nies are reg­is­tered say they, too, are suffering.

At the address in West­on-super-Mare, where 17 sus­pect­ed scam com­pa­nies, includ­ing Zion, are reg­is­tered to a flat above a Chi­nese take­away, the own­er, Jin Lin, said firms were being set up there with­out his con­sent and that he did not know who was behind them.

A message from a ‘scammer’ who claims they’re a victim of forced labour and being forced to carry out this scam.
A mes­sage from a ‘scam­mer’ who claims they’re a vic­tim of forced labour and being forced to car­ry out this scam.

“What I wish is that Com­pa­nies House would find out who is real­ly run­ning these com­pa­nies. Because they can use any address and say the com­pa­ny is here, but nobody knows where the com­pa­ny is. I’ve returned many, many let­ters but they still send me the same let­ters. What can I do?” he said.

At the Chase Busi­ness Cen­tre in Enfield, north Lon­don – where 20 sus­pect­ed scam com­pa­nies are reg­is­tered – Michael Davies, direc­tor of the firm that runs the cen­tre, said he was unable to answer ques­tions about the firms. He said: “We run a busi­ness cen­tre and clients can use the address as a post­box and reg­is­tered office and have no con­nec­tion with these companies.”

And when we vis­it­ed anoth­er address linked to mul­ti­ple scam com­pa­nies in east Lon­don, a young father liv­ing there with his wife and their chil­dren described how vir­tu­al squat­ting by crim­i­nals had left them liv­ing a “night­mare”.

Accord­ing to Com­pa­nies House, the prop­er­ty is the head­quar­ters for more than 200 com­pa­nies. In real­i­ty, it is a two-bed flat in a grey tow­er block.

Over the last five years, the res­i­dent, a coun­cil ten­ant who asked not to be named, has been inun­dat­ed with let­ters addressed to peo­ple he has nev­er met, who sup­pos­ed­ly run busi­ness­es from his flat. He esti­mates there have been “three or four thou­sand” and offers up two plas­tic bags stuffed full with the most recent ones as proof. Some­times, strangers show up and ask ques­tions about com­pa­nies sup­pos­ed­ly reg­is­tered to the address. “I’ve said to my fam­i­ly, ‘When I’m not home, don’t open the door,’” he says.

He says the prob­lem has been repeat­ed­ly flagged to Com­pa­nies House and has been told it is inves­ti­gat­ing. But still the let­ters come.

Around the world, law enforce­ment agen­cies are work­ing hard­er to tack­le cryp­tocur­ren­cy crime. The Nation­al Crime Agency is prepar­ing to launch a new unit devot­ed to tack­ling the scams, while Inter­pol, which facil­i­tates world­wide police coop­er­a­tion, recent­ly set up a finan­cial crime and anti-cor­rup­tion centre.

But in the UK, experts say the focus must be on pre­ven­tion – warn­ing that until the com­pa­ny reg­is­tra­tion process is improved, organ­ised crime groups will con­tin­ue to see the UK as an easy tar­get for set­ting up com­pa­nies used in finan­cial scams.

It cur­rent­ly costs as lit­tle as £12 and takes a few min­utes to reg­is­ter a com­pa­ny online, with­out the need to pro­vide any proof of ID. The gov­ern­ment has pledged to tight­en the rules, includ­ing intro­duc­ing a require­ment to ver­i­fy infor­ma­tion pro­vid­ed to Com­pa­nies House. How­ev­er, the sec­ond part of the eco­nom­ic crime bill is yet to go before the Lords and the time­line for its future imple­men­ta­tion is unclear.

“Com­pa­nies House is our first line of defence, but it’s not putting up much of a fight at all,” said Dame Mar­garet Hodge, MP and chair of the all-par­ty par­lia­men­tary group on anti-cor­rup­tion and respon­si­ble tax.

In the mean­time, vic­tims face a dif­fi­cult path to jus­tice. The abil­i­ty of law enforce­ment agen­cies to recov­er funds remains lim­it­ed, due in part to the rel­a­tive anonymi­ty of cryptocurrency.

Those inter­viewed by the Observ­er and TBIJ report­ed their cas­es to police forces in the UK or their home coun­tries, the Finan­cial Con­duct Author­i­ty, or cryp­tocur­ren­cy exchanges that they had used to make trans­fers. None had any suc­cess recov­er­ing their funds.

For some, the impact can be devastating.

Paul Wil­son, 38, from Stock­ton-on-Tees, is slow­ly rebuild­ing his life after being tricked into invest­ing $50,000 into a bogus plat­form reg­is­tered at the Chase Busi­ness Cen­tre in Enfield, north London.

At the time of the scam, he was vul­ner­a­ble: he and his Ukrain­ian part­ner had just been forced to flee their home in Kyiv after the Russ­ian inva­sion. At the same time, his floor­ing busi­ness had ground to a halt and the val­ue of his cryp­tocur­ren­cy invest­ments had crashed.

When he realised he had lost it all, he con­sid­ered end­ing his life. “I just jumped in my car and I just drove … and I was just at the point of com­mit­ting sui­cide, to be hon­est,” he said. “My fam­i­ly and my girl­friend man­aged to find me and talked me back.”

Anoth­er UK vic­tim, James Hutch­e­son, a British Trans­port Police offi­cer of 28 years, was tar­get­ed in a cryp­tocur­ren­cy scam bear­ing the hall­marks of pig butcher­ing last year. The 51-year-old ini­tial­ly sent £40,000 and quick­ly earned £5,000 back. In all, he is thought to have invest­ed around £100,000 – his entire pen­sion lump sum.

Accord­ing to his friends and fam­i­ly, the fraud left him pen­ni­less and at risk of los­ing his home. He took up dec­o­rat­ing jobs and was work­ing as a deliv­ery dri­ver but “began to spi­ral”. On 25 May 2022, Hutch­e­son died near his home in Chip­pen­ham, Wilt­shire. Short­ly before his death, he tweet­ed to warn oth­ers about a “scam” web­site that has since dis­ap­peared, along with the peo­ple behind it.

Ian Sin­gle­ton, area coro­ner for Wilt­shire and Swin­don, con­clud­ed that Hutch­e­son had tak­en his own life after the scam left him in “extreme dis­tress” for which he did not seek pro­fes­sion­al help. He had report­ed it to Action­Fraud, which had referred it to Wilt­shire police, but had lit­tle prospect of get­ting his mon­ey back.

Hutcheson’s friends and fam­i­ly described him as a “sen­si­tive soul” and a “social ani­mal with a big smile” who was always very care­ful with his finances. “To this day I can­not under­stand how it sud­den­ly esca­lat­ed so fast from a few thou­sand to such a big sum,” a for­mer part­ner said.

“It appeared as if the whole world was on his shoul­ders,” a friend adds. “He didn’t know what to do.”

In a state­ment last week, Com­pa­nies House said it was aware of the mis­use of the com­pa­ny reg­is­ter to sup­port illic­it activ­i­ty and that it “recog­nised the dif­fi­cul­ties faced by those affect­ed by this”. “Where poten­tial crim­i­nal activ­i­ty is iden­ti­fied, we work close­ly with law enforce­ment agen­cies,” a spokesman said. 

The Depart­ment for Busi­ness, Ener­gy & Indus­tri­al Strat­e­gy said the gov­ern­ment was work­ing through the eco­nom­ic crime bill to intro­duce iden­ti­ty ver­i­fi­ca­tion for those who reg­is­ter com­pa­nies. The bill would “give Com­pa­nies House new pow­ers to check, chal­lenge and decline any sus­pi­cious infor­ma­tion on the register”.

The Finan­cial Con­duct Author­i­ty said: “Cryp­toas­sets are unreg­u­lat­ed and high-risk, which means peo­ple are unlike­ly to have any pro­tec­tion if things go wrong. If peo­ple choose to invest in cryp­toas­sets they should be pre­pared to lose all their money.”

Bar­row, the anti-mon­ey laun­der­ing expert and host of The Dark Mon­ey Files pod­cast, said the pro­posed reform of Com­pa­nies House was a step for­ward, but that sig­nif­i­cant loop­holes still need­ed to be closed – such as ambi­gu­i­ty around ID ver­i­fi­ca­tion for indi­vid­u­als who use com­pa­ny ser­vice providers to reg­is­ter com­pa­nies on their behalf – in order for real change to happen.

He warned that, until then, the UK would con­tin­ue to be regard­ed by organ­ised crime groups as a “safe coun­try in terms of crim­i­nal­i­ty and corruption”.

“We are that per­fect storm of being high­ly regard­ed, cheap, and easy to incor­po­rate [a com­pa­ny],” he says. “Why would you go any­where else?”

* Some names have been changed

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