Bay Area crypto crime fighter targets ‘pig butchering’ | Technology

Formed in the 1990s in response to the rise of internet crimes, REACT is now taking on a new cybercrime wave based on a new technology: crypto.

West has become one of the most visible figures in the law enforcement campaign against crypto-related crimes. “There was a lot of money in crypto, and there were some really bad actors trying to go after it,” West said.

In an interview with The Examiner, West talked about how she got involved in the fight against crypto crimes and what has become her obsession with stopping “pig butchering” scams, fraud that entails luring victims into making sizable crypto investments and then stealing the funds.

This interview was edited for clarity and brevity.

How did you first hear about bitcoin and crypto? I’ve been a prosecutor for 25 years and six years ago, I got assigned to this high-tech team called the REACT. It’s a multi-jurisdictional task force made up of officers who are specially trained in high-tech crime.

In March 2018, we got a case involving a local victim, a resident of Cupertino who said, “My telephone service has been removed. I don’t have access to my telephone. This bad actor has taken over my Facebook, my Twitter and my cryptocurrency account.”

That was the first time that we had dealt with any type of cryptocurrency case at all. We weren’t at all familiar with a situation where a scammer could take over your phone service.

We began to investigate, and we were fortunate in that we had an officer in our agency who had been trained in cryptocurrency in Washington DC. He thought, “OK, well, why don’t we trace this cryptocurrency and see where it landed.”

The victim was able to give us IP addresses that had connected to his phone and we traced those and those were being done through VPN, so that didn’t work.

We were finally able to solve the case by checking the phone records. That was the first SIM-swapping case that we were familiar with. From there, over the next year and a half, we did a bunch of SIM swapping cases involving cryptocurrency. So we quickly got ourselves up to speed in tracing cryptocurrency and getting cryptocurrency back into the hands of victims.

Can you walk me through the crypto element in the scam? Let’s say you’re an investor. Back then, a lot of people were talking on Twitter, and they were hashtag crypto this, crypto that. So it wasn’t that difficult to figure out who might be holding cryptocurrency.

These scammers were usually groups of young men. They were operating out of their parents’ basements late at night. They knew each other through their online handles, not personally. They would operate in loosely formed groups. They would create target lists. They go after Ben Pimentel, who they know to be an investor. They’ve done the research on you. They’ve got your mobile phone number. They probably figured out some of your other addresses. They know your Facebook and your Twitter.

You go to bed on a Friday night like a normal person. We’re still up. We call AT&T and we get them to change incoming traffic to your phone to the device that I’m holding.

They essentially trick someone to make this switch.

It’s happening in different ways. It’s being done by trick. It’s being done by bribe. It’s being done by actual hacking. The result is your phone traffic is coming to a device that I was holding.

Then I would go to (your email account). I would say I forgot my password (and would get) a six-digit code to the device I’m holding. Now I’m in your Gmail account. I’m going to change your password, and now you’re locked out of your Gmail account. Now I’m figuring out you have an email from Coinbase or you have an email from Gemini. That must be where you hold your crypto. Then I go to Coinbase or Gemini. I do the same process. I take over that account. And then I ship the money to a wallet.

The reason crypto mattered is because at that point they could transfer it to a cold wallet and nobody would know who it was. And it’s irreversible and the (funds) would be gone. So you wake up the next morning and you have no phone access and you’ve lost $1 million. It’s a complete change in a way that fraud could be done on a massive scale because never before could I steal all of your money overnight. I can never get access to your bank account in that way that I could get access to your cryptocurrency

Tell me about your very first reaction to bitcoin, blockchain and decentralized finance. I think my first reaction was like, “Wow, this is going to be a game changer in terms of the ways bad guys can move money.” It felt at that time that there was such an interest in Silicon Valley with people like getting into crypto and wanting to be early crypto investors. It felt like there was a lot of money in crypto, and there were some really bad actors trying to go after it.

How is it different from traditional scams? What made it more challenging? A couple of things. (One is) the jurisdictional nature of it. When I think of someone being able to steal that amount of money, I think of someone having to be close to the person and then this actually happening in my jurisdiction.

But what we were finding is that these scammers lived all over the country, many outside the country. A real barrier for us was a number of them were juveniles. The laws don’t really enable us to prosecute juveniles like we do adults despite the fact that they were causing massive damage.

What stood out for you in terms of the role you play in this? What stood out and what continues to stand out is being on the edge of something new and scary, and we were doing things that had never been done before. We were using laws in a way that had never been used before and we were trying to conform existing laws to a brand-new technology.

Can you elaborate on that? There was a very steep learning curve for everyone associated with these cases. The first time I came into a courthouse and asked a judge to hold one of these hackers in custody, we had made an arrest in the State of Oklahoma and brought this person to California. I remember a very well-respected but sort of aging lawyer, who was the defense attorney, who was saying things like, “This is all funny money, anyway. This isn’t even real money.” Trying to educate the judges about the fact that this was very real and could be traded for a McLaren or a diamond necklace was an initial challenge.

The cases that you mentioned happened in 2018-2019. How have the criminal cases you’re handling changed? We’re seeing new crimes, new methods of scamming. For the past year, we’ve been deeply involved in a major worldwide issue called pig butchering. It starts as a romance scam. A victim is led to invest money. The investment opportunity is completely fraudulent and doesn’t exist and the scammers continue to get the victim to put money into it. Ultimately, they lose all their money.

(Pig butchering) is exponentially more dangerous because it combines two human desires at the same time: the desire for companionship and love and having a trusted partner at the same time. It is satisfying the desire to be wealthy, self-sufficient, financially stable.

The way this scam works is that the scammer spends a substantial amount of time cultivating that trusted relationship and really building this connection that enables the amount of trust needed when a victim is asked to essentially put everything they have into this. So what happens is, you know, the scam starts off small, small and they ask for just a few thousand dollars. But the more they get to know the victim, the more they know how many assets they have.

What’s happening here is these victims are seeing completely falsified returns. And they’re thinking that they’re in great shape. So they then liquidate their 401(k), liquidate children’s college accounts. They get whole lines of credit on their house. They call up their friends and family and get them to invest. We’re seeing people literally put every penny they have into this scam.

I was fascinated by this particular type of crime. So I started doing a lot of research on it. It became clear that this crime itself was happening in Southeast Asia. That doesn’t necessarily put us off because we have made arrests in Malta. We’ve been involved in arrests in the U.K. We’re familiar with how to work internationally.

What has been the impact of the crypto crash, which escalated with the FTX meltdown crypto-related crimes?

I would say that notwithstanding the recent failures we’ve seen in the crypto world that there will be no stop to the use of the blockchain by bad actors. This is the way that bad actors are going to move money. This is the way that they are going to move money to bad governments, to buy guns or move human trafficking money. This is the way that bad money’s gonna get moved.

Given the state of the industry, there have been reports that crypto crimes actually dipped a little bit because of the market crash.

Oh my goodness, that is not my experience.

I can tell you pig butchering is not to be overlooked. What is happening in Southeast Asia is a major tsunami that we have not even remotely begun to see the end of. It’s bankrupting household by household throughout much of the world, resulting in suicides.

We had a test case and it was a man who came to us in May of last year. He was an engineer. He lost $240,000. We found a wallet that had it. On Dec. 16, a judge allowed us to return the content of that wallet to him. So that was the success story.

What I found was that really very few people in law enforcement in the United States knew how to handle any type of cryptocurrency case. I started something I call the crypto coalition and a listserv. About every three weeks we have a webinar.

We’ve had experts who can teach law enforcement on how to create a government wallet, how to do tracing, how to get it back to victims. And we’re trying to teach that by step. The reception to this coalition has been outstanding. We’re up to 600 members, and they are from all over the world and all over the United States. We’ve developed a really excellent means of communicating the work we had all been doing and helping each other.

Is there a case or a particular victim whose story resonates with you?

There was a victim who lost a million and a half dollars, which is his family’s life savings. I’ve read texts between him and the scammer, and they’re gut-wrenching because it just shows the absolute callousness of these people on the other end of the phone. The victim would write to them and share information about his dying father and about the stress he felt having to be one of his siblings that would take care of his father. Then he would reach out to this scammer who he believed to be a very close, trusted friend and say things like, “Are you sure these crypto tips you’re giving me are good? If they are not good, I will suicide in secret.” And (the response was) “No, I assure you this is all this is all true.”

To read those stories is chilling. We were able to get back $103,000. For him, which was a big deal. He thought for a long time that there was nothing left and he could get nothing back.

What are you most worried about?

I am petrified that this scam is being allowed to continue in lawless situations internationally where we won’t be able to put handcuffs on people and make this stop.