China Unleashes Crackdown on ‘Pig Butchering.’ (It Isn’t What You Think.)
Beijing is going after scam mills that operate out of secretive, dystopian compounds and swindle people worldwide
Beijing is going after scam mills that operate out of secretive, dystopian compounds and swindle people worldwide
It’s called “pig butchering.”
Armies of scammers operating from lawless corners of Southeast Asia—often controlled by Chinese crime bosses—connect with people all over the world through online messages. They foster elaborate, sometimes romantic, relationships, and then coax their targets into making bogus investments. Over time, they make it appear that the investments are growing to get victims to send more money. Then, they disappear.
In recent months, China has unleashed its most aggressive effort to crack down on the proliferation of the scam mills, reaching beyond its territory and netting thousands of people in mass arrests. Its main target is a notorious stretch of its border with Myanmar controlled by narcotics traffickers and warlords.
For decades, frontier fiefdoms such as those in Myanmar have been havens for gambling and trafficking of everything from drugs to wildlife to people. Now, they are dens for pig-butchering operations.
The scammers operate out of secretive, dystopian compounds, many of which are run by Chinese fugitives who fled their country to places where it was easier to flout the law. They cheat Chinese citizens out of billions of dollars each year, as well as victims across the globe. The U.S. Treasury Department in September warned Americans about the scams.
In addition to remote hillside towns in Myanmar, these heavily guarded enclaves are also found in gambling hubs such as Cambodia’s Sihanoukville and Poipet. Cambodian authorities have carried out sporadic raids with China’s help, but the problem has persisted.
For Beijing, it is a significant source of embarrassment that Chinese criminals are at the centre of scams ensnaring people the world over, said Jason Tower, Myanmar country director for the United States Institute of Peace, an independent research organisation founded by the U.S. Congress that specialises in conflict mitigation.
China is “quite sensitive to the narratives that could potentially emerge,” he said. “These are largely Chinese crime groups which China, for years, did very little to check.”
The operations flourished during the Covid-19 pandemic when border trade stopped and internet use surged. They have also fuelled a human-trafficking crisis.
Many of the scammers entrapping people are themselves victims of human trafficking, lured abroad by fake job ads and held captive by withholding pay and passports. The United Nations human-rights office says more than 120,000 people may be forced to work as scammers in Myanmar, with another 100,000 in Cambodia.
One Malaysian trafficking victim told The Wall Street Journal that he was trained to spend weeks or months “fattening” his victims by gaining their trust before “butchering” them. His story was similar to those told by others lured into working in the scam mills. After responding to an ad on a job-recruitment website, he said he accepted an offer for a customer-service role in Cambodia. Once there, he was driven to a prison-like complex in Sihanoukville and forced to work as a scammer under threats of violence.
He said he had a handler who trained him, supplying him with a smartphone preloaded with fake social-media accounts, a “victim list” containing contact information of potential targets and various scripts designed to break the ice and build their trust. After several weeks, he said he convinced a driver who brought people and supplies to the compound to help him escape.
Regional migration researchers have documented trafficking from dozens of countries. Many victims come from Southeast Asia but some from as far as Brazil and Kenya.
“China is starting to signal that enough is enough,” said Inshik Sim, a Bangkok-based lead analyst for the U.N. Office on Drugs and Crime’s regional operations.
In August, China launched a “special joint operation” with three nearby countries and increased pressure on armed groups that oversee remote parts of Myanmar, convincing them to hunt down, round up and repatriate almost 5,000 Chinese nationals suspected of illicit activity.
Chinese authorities have zeroed in on several border areas that are part of Myanmar but are fully controlled by armed groups. These places have often drawn large investments from Chinese nationals—both legal and illicit. Many Chinese people, including notorious fugitives, live in these enclaves, where the Mandarin language and Chinese currency are commonplace.
The Wa Self-Administered Division, located along China’s southwestern border, is of particular interest to China, in part because Beijing has so much leverage over it. The area is home to the ethnic minority Wa people, who claim the territory as their ancestral home. China has been the group’s main benefactor for decades; historians say they helped the Chinese Communist Party flush out enemies who fled across the border in the 1950s and ’60s. The area later became a major economic gateway to resource-rich Myanmar.
Independent researchers say its de facto leadership, the United Wa State Army, commands a force of more than 20,000 people armed with modern Chinese equipment such as portable surface-to-air missiles and armored vehicles.
The area has been a major source of opium for almost two centuries, and in recent decades has become a leading producer of synthetic drugs such as methamphetamine. The U.S. Treasury blacklisted the UWSA in 2003 under the Kingpin Act, and has sanctioned dozens of people and businesses linked to the group, calling it “the largest and most powerful drug trafficking organisation in Southeast Asia.”
The UWSA and other criminal networks have increasingly turned to scamming in addition to the drug trade.
According to a 2022 report in Chinese state media, authorities blocked 2.1 million fraudulent websites and some $51.6 billion in suspicious transactions over the previous year. Beijing has warned citizens to look out for dubious rebate offers, investment schemes and unsolicited contact from anyone claiming to represent a company or law enforcement.
The first sign of a serious cleanup came in early September, when China worked with the UWSA to orchestrate two days of raids that ended with more than 1,000 suspects being marched across the border into Chinese custody. Then China upped the ante, taking aim at the group’s leadership.
On Oct. 12, China’s Ministry of Public Security said arrest warrants had been issued for two senior Wa officials accused of leading scam networks: the state’s construction minister Chen Yanban and a mayor named Xiao Yankui. Four days later, the UWSA said both had been stripped of their roles. Their whereabouts is unknown.
The same day, Chinese authorities said they had transferred 2,349 “telecommunication fraud” suspects from Myanmar two days prior—the single largest such handover. China says 4,666 suspects have been repatriated from Myanmar since the crackdown began earlier this year.
“This is by any measure a major operation, which speaks to the impact on China and Chinese citizens, and the seriousness with which Beijing is approaching this,” said Richard Horsey, senior adviser on Myanmar for the International Crisis Group, a Brussels-based think tank specialis ing in conflict prevention.
While China may be turning up the heat on cybercriminals along its border, experts say scamming is so lucrative that the ringleaders are likely to simply look for more fertile ground—areas in weak states where law enforcement is lax.
“These groups are not going to go away easily,” said Tower, of the U.S. Institute of Peace. “They’re sitting on a massive source of capital and there are many fragile places in the world that they’ll be able to exploit.”
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Nvidia’s earnings will test Wall Street’s confidence in the AI boom.
Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.
When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.
The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.
But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.
Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.
After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.
“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”
The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.
Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.
In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.
Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.
“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”
Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.
“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.
The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.
The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.
In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.
Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.