It starts with an unsolicited text message. And then it’s all about gaining the victim’s trust.
5 min
Do you get unsolicited text messages from people you don’t know? Be forewarned: If you respond, you could be falling for a particularly dangerous online scam that has found victims around the world. Some unfortunate individuals have lost millions of dollars.
There is even a name for it. Pig butchering. Victims are fattened up, made to trust the scammer and think they are making tons of money, until they are mercilessly taken—sometimes for everything they have.
On June 6, at the WSJ Tech Live: Cybersecurity conference in New York City, two cybercrime experts sat down with Wall Street Journal reporter Robert McMillan to discuss how pig butchering works and what is being done about it. The participants were Troy Gochenour, an investigator with the Global Anti-Scam Organization, a nonprofit that helps victims and raises public awareness of scams, and Jamil Hassani, a supervisory special agent with the Federal Bureau of Investigation. An edited transcript of their conversation follows.
WSJ: Why “pig butchering”?
GOCHENOUR: It’s not our term. In Chinese, it is shā zū pán , or pig-killing plate. What makes this scam so effective is they want to build trust so that you might think they could be a potential love interest or a business partner. Once they built that trust, then they will start talking about how they’ve made a lot of money in cryptocurrencies and how the victim could, too.
WSJ: It’s a variation on the romance scam. Instead of asking for money to buy a plane ticket, they propose to make money together?
HASSANI: Absolutely. The rise in cryptocurrency has opened the door for these scammers to take your money instantaneously. There are no third parties doing the reconciliation. If you do a regular wire transfer and you contact the FBI within 72 hours, chances are we can get that money back for you. But with crypto, it’s almost immediate and it’s gone.
WSJ: Are you seeing more pig butchering because of the rise of crypto?
HASSANI: Absolutely. The rise since 2019 for victimisation is almost 2,000%.
WSJ: Why does it work?
GOCHENOUR: The social-engineering aspect is very powerful. I have stories that are very sad: folks who have been warned that they’re getting scammed, and yet, because they’ve been socially engineered so much, they actually continue to invest.
They’re looking for everybody, but they prefer people with titles—doctor, dentist, IT professional, CEO. I follow them on the communications platform Telegram, so I have a lot of their training documents, manuals on how they build those relationships. This is an entire industry tied to largely Chinese organised crime.
WSJ: Jamie, psychologically speaking, why does this work?
HASSANI: I remember arresting a hacker out of Tunisia. A 19-year-old kid that was able to bypass levels of security within the Department of Defense, took down a few banks and was wreaking havoc across the world. He explained to me: “Hackers are stupid. They go after the systems, when human beings have way more vulnerabilities. They have the keys to the treasure chest. And it’s so easy to turn off their mental firewall.”
Try to think of a time you were in a relationship where the threat of your spouse or significant other leaving caused you to do pretty much anything to keep them around. Every scam evokes an emotion. It could be love, fear, panic. Your ability to critically think is shut off.
WSJ: Sometimes when I’ve talked to scam victims, it’s like the more they have invested, the harder it is for them to believe they have been taken.
HASSANI: It’s the stigma. The victims can’t fathom that they could have been so stupid, quote unquote. So they hold on to this hope that it had to have been real, the love had to have been there, or the trust, because they’re texting every day, 30 to 100 times. The scammers use information they glean from your communications and social media to validate you in a way that no one else can.
WSJ: If you suspect or know somebody is a victim, is there something you can say that will snap them out of it?
GOCHENOUR: Unfortunately, people are people. We’ve had victims we’ve warned more than once, and they continued to give.
The United Nations Office on Drugs and Crime says there could be as many as a couple hundred thousand of these scammers operating throughout Southeast Asia.
HASSANI: A lot of these scammers are trafficked human beings. When a human being is subjected to that kind of circumstance, their will to succeed is intense, because their life, or their family’s life, depends on it. They are constantly fine-tuning strategies, and trying to stay one step ahead of whoever is closest on their tail. These scammers contribute something like half of their country’s GDP, so the local government’s not going to do much.
WSJ: The FBI knows who’s running these scams, largely?
HASSANI: Yes, absolutely.
WSJ: Can you get them?
HASSANI: There are no treaties between those specific countries and the U.S. We’ve taken steps. We work with multiple organizations, including the Secret Service, Department of Homeland Security, and we’re applying pressure on these countries to start to take action.
WSJ: There are different layers of operators; some do the texting, others do the talking and then there are the video calls.
GOCHENOUR: Sure. So if you get that wrong number, the text to your phone, you respond, saying wrong number. I’m not Paul. Jane. Whoever. They say, oh, so sorry. Uh, my assistant gave me your number. I hope I’m not bothering you.
Sometimes they even send you a picture. That sounds interesting. So you continue to talk. Oh, what’s your name? Where do you live? What do you do?
They’re looking for a weakness. Are you single? Oh, weakness might be romance. Oh, you’re in business. I could be your business partner. But they also want to know what kind of assets they can take from you.
On their Telegram pages, I’ve seen screenshots of their chats. They can chat in Chinese, and it shows up to you as your native language. And when you chat back it shows up to them in Chinese. At the top, it would say your first name, maybe your age, two homes, 401(k).
As you continue to chat, you’re actually being sent to multiple people chatting with you on this one account. You may not even recognize it. They are all in the compound. Everything they do is monitored. So if that person is there against their will, if they don’t chat with you to lure you in, they could get beaten.
WSJ: This scam involves legitimate organizations as well, right? Cryptocurrency companies, the messages come on legitimate apps. What can be done to mitigate this?
HASSANI: Until a collective strategy is put together, you need to be aware of the red flags. And the first one is unsolicited contact. We’ve all gotten that text message, “hi.” That message has a fundamentally different feeling to somebody who is elderly and widowed and lonely. When they see “hi,” that has a profound impact on them.
If you get an unsolicited contact, ask questions. If they want you to invest in cryptocurrency, do a little research on the site. Is this website legit? Some are legitimate and registered with, say, the Treasury Department’s Financial Crimes Enforcement Network or the Securities and Exchange Commission.
WSJ: Some of the scam sites actually register.
HASSANI: True. Most of them aren’t registered with the SEC, but a lot are.
GOCHENOUR: In 2021, 2022, they were using apps like MetaTrader 5 or 4, a foreign-exchange trading app. It’s legitimate. You could go on this app and think you’re doing something legitimate, but you’re sending money to their scam broker website.
WSJ: Why can’t you stop these guys?
HASSANI: They’ll have one major domain with multiple subdomains, so to speak. So as soon as we take that website down, another one pops up. Our strategy is to go after the kingpin.
WSJ: Have you hit any kingpins yet?
HASSANI: We have. The indictments, a lot of them are still under seal. But tech-support scams are a big part of this. We took down three tech-support buildings near Kolkata less than a year ago.
WSJ: All connected to pig butchering?
HASSANI: Yes, and they do the same thing—traffic human beings to scam.
WSJ: Scammers use services like WhatsApp, and the money gets sent to them often through a legit crypto company. Could the tech companies be doing more here?
GOCHENOUR: The tech companies and the exchanges are doing more. And I know that because when I follow the scammers on their chats, they talk about, “Why can’t I get this money? The victim put it in the account, but I can’t get it. What’s going on?”
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4 min
U.S. investors’ enthusiasm over Japanese stocks at this time last year turned out to be misplaced, but the market is again on the list of potential ways to diversify. Corporate shake-ups, hints of inflation after years of declining prices, and a trade battle could work in its favor.
Japanese stocks started 2024 off strong, but an unexpected interest-rate increase in August by the Bank of Japan triggered a sharp decline that the market has spent the rest of the year clawing back. Weakness in the yen has cut into returns in dollar terms. The iShares MSCI Japan ETF , which isn’t hedged, barely returned 7% last year, compared with 30% for the WisdomTree Japan Hedged Equity Fund .
The market is relatively cheap, trading at 15 times forward earnings, about where it was a decade ago, and events on the horizon could give it a boost. Masakazu Takeda, who runs the Hennessy Japan fund, expects earnings growth of mid-single digits—2% after inflation and an additional 2% to 3% as companies return more to shareholders through dividends and buybacks.
“We can easily get 10% plus returns if there’s no exogenous risks,” Takeda told Barron’s in December.
The first couple months of the year could be volatile as investors assess potential spoilers, such as whether the new Trump administration limits its tariff battle to China or goes wider, which would hurt Japan’s export-dependent market. The size of the wage increases labor unions secure in spring negotiations is another risk.
But beyond the headlines, fund managers and strategists see potential positive factors. First, 2024 will likely turn out to have been a record year for corporate earnings because some companies have benefited from rising prices and increasing demand, as well as better capital allocation.
In a note to clients, BofA strategist Masashi Akutsu said the market may again focus on a shift in corporate behavior that has begun to take place in recent years. For years, corporate culture has been resistant to change but recent developments—a battle over Seven & i Holdings that pits the founding family and investors against a bid from Canada’s Alimentation Couche-Tard , and Honda and Nissan ’s merger are examples—have been a wake-up call for Japanese companies to pursue overhauls. He expects a pickup in share buybacks as companies begin to think about shareholder returns more.
A record number of companies have also delisted, often through management buyouts, in another indication that corporate behavior is changing in favor of shareholders.
“Japan is attracting a lot of activist interest in a lot of different guises, says Donald Farquharson, head of the Japanese equities team for Baillie Gifford. “While shareholder proposals are usually unsuccessful, they do start in motion a process behind the scenes about the capital structure.”
For years, money-losing businesses were left alone in large corporations, but the recent spate of activism and focus on shareholder returns has pushed companies to jettison such divisions or take measures to improve them.
That isn‘t to say it is going to be an easy year. A more protectionist world could be problematic for sentiment.
But Japan’s approach could become a model for others in this new world. “Japan has spent the last 30 to 40 years investing in business overseas, with the automotive industry, for example, manufacturing a lot of the cars in the geographies it sells in,” Farquharson said. “That’s true of a lot of what Japan is selling overseas.”
Trade volatility that hits Japanese stocks broadly could offer opportunities. Concerns about tariffs could drag down companies such as Tokio Marine Holdings, which gets half its earnings by selling insurance in the U.S., but wouldn’t be affected by duties. Similarly, Shin-Etsu Chemicals , a silicon wafer behemoth that sells critical materials, including to the chip industry, is another potential winner, Takeda says.
If other companies follow the lead of Japanese exporters and set up shop in the markets they sell in, Japanese automation makers like Nidec and Keyence might benefit as a way to control costs in countries where wages are higher, Farquharson says.
And as Japanese workers get real wage growth and settle into living in an economy no longer in a deflationary rut, companies focused on domestic consumers such as Rakuten Group should benefit. The internet company offers retail and travel, both of which should benefit, but also is home to an online banking and investment platform.
Rakuten’s enterprise value—its market capitalization plus debt—is still less than its annual sales, in part because the company had been investing heavily in its mobile network. But that division is about to hit break even, Farquharson says.
A stock that stands to benefit from consumer spending and the waves or tourists the weak yen is attracting is Orix , a conglomerate whose businesses include an international airport serving Osaka. The company’s aircraft-leasing business also benefits from the production snags and supply-chain disruptions at Airbus and Boeing , Takeda says.
An added benefit: Its financial businesses stand to get a boost as the Bank of Japan slowly normalizes interest rates. The stock trades at about nine times earnings and about par for book value, while paying a 4% dividend yield.
Corrections & Amplifications: The past year is expected to turn out to have been a record one for corporate earnings in Japan. An earlier version of this article incorrectly gave the time frame as the 12 months through March. Separately, Masashi Akutsu is a strategist at BofA. An earlier version incorrectly identified his employer as UBS.
