A high-profile crypto scam known as a ‘pig butchering’ scam, a term that originated in Asia, and alludes to the method of fattening a pig up before slaughter, has been making headlines recently, ensnaring even industry titan, Binance, in its fray. A U.S. District Judge, however, has now dismissed allegations against the crypto exchange platform, ruling that Binance was not involved in the $8 million scam. The news comes as the frequency of such scams increases, posing significant challenges to law enforcement agencies worldwide.
The anatomy of a pig butchering crypto scam
The pig butchering scam, a form of online fraud that targets victims through romantic and financial manipulation, has been on a steep rise. In these scams, fraudsters initiate contact through dating apps or text messages, building a romantic relationship with their victims before introducing them to a high-profit investment opportunity. Divya Gadasalli, the plaintiff in this case, fell prey to such a scam, losing more than $8 million.
Gadasalli was wooed on the popular dating site Tinder by an individual identified as Jerry Bulasa. Bulasa, alleged to be a successful crypto investor, persuaded Gadasalli to invest her funds through him. Gadasalli’s total investment within a year exceeded $8 million. When Gadasalli realized she could not withdraw any funds from her account, she filed a lawsuit against Bulasa, his accomplices Dong Lian and Danyun Lin, and several entities, including Binance and crypto exchange Poloniex.
Cryptocurrency platforms and legal jurisdiction
In response to the lawsuit, Binance moved for a dismissal on grounds of lack of personal jurisdiction and failure to state a claim. Gadasalli, on the other hand, claimed that Binance was complicit in the scheme by providing exchange services to the scammer. She further argued that Binance and its U.S. subsidiary, Binance.US, were the same entity since customers often used Virtual Private Networks (VPNs) to access services.
However, presiding Judge Amos Mazzant dismissed these claims, stating that Gadasalli could not establish Binance’s involvement in the fraudulent operation. In his ruling, Judge Mazzant stressed that Binance and Binance.US were prohibited from operating in Texas. Therefore, even if VPNs were used to bypass regional restrictions, it would not be enough to subject Binance to the Court’s personal jurisdiction.
The decision is a significant example of the complex jurisdictional issues in the burgeoning crypto space. As law enforcement agencies grapple with the challenges of dealing with digital currency fraud, which likely totals billions of dollars, it highlights the importance of clear guidelines and regulations in the sector.
