Justia Lawyer Rating
Federal Bar Association
Google Reviews
Expertise - Best Tax Attorneys in San Francisco 2022
Super Lawyers Rising Stars

Pig Butchering Crypto Scam: Why is a cryptocurrency exchange requesting I deposit more tokens for taxes?

The latest crypto scam is being called “pig butchering” because it is a heavily scripted and contact intensive fraud meant to fatten the prey (or victim) before slaughter (or taking their money).


Emanating from Southeast Asia, the crypto investment scam typically starts with the fraudster making contact with the victim via social media, dating apps, or WhatsApp using a fake profile. They slowly build a relationship and rapport to earn the victim’s trust before casually mentioning they make significant amounts of money through cryptocurrency investments.


When the victim expresses interest in making an investment, the scammer will direct them to websites that appear to be legitimate cryptocurrency exchange platforms. In reality, the scammer exclusively controls the exchange.


The victim will usually go to a mainstream exchange like Coinbase, buy stable coins, and transfer a few small investments to the fake platform’s wallet. The scammer will then post modest gains and even allow the victim to withdraw small amounts of money once or twice as a way to build trust and prove the platform is legitimate.


Once convinced that the platform is legitimate and the gains are real, the victim will start making larger investments, sometimes in excess of hundreds of thousands of dollars. In many cases, victims get this money from personal loans, retirement assets, and home equity lines of credit. 


When the victim eventually wants to withdraw the larger investments made, they are denied by the scammer. The fake platform will say the victim must pay a percentage (10-30%) of the requested amount in taxes before the withdrawal can be processed. This requirement is a lie. Even if the victim does pay the purported taxes, the scammer will continually deny the withdrawal of funds for one reason or another.

Eventually, the scammer vanishes, cuts off contact, and takes the victim’s invested money resulting in another successful pig butchering crypto scam.


How Kugelman Law Can Help a Pig Butchering Scam Victim


The tax and crypto attorneys at Kugelman Law can work with pig butchering scam victims based in California to help in recovery efforts with law enforcement and tax reporting needs.


Contingency agreement to claim lost funds: You can hire our crypto scam attorneys on contingency to try to claim lost funds. We will help inform law enforcement through our connections in the industry, file reports, and follow up on your behalf in an attempt to claim lost funds. Working with our attorneys increases the likelihood that if funds are recovered, then you will be notified and able to claim the assets seized. It's important to note though that the chance of recovery in these situations is very slim.

Tax reporting theft loss: Kugelman Law crypto tax attorneys and accountants can help file a theft loss for the tax year that you lost your funds, which will help decrease your overall taxable income in the year you incurred the loss. This engagement would be on a flat fee basis and not contingency.

For tax reporting purposes, it may be possible to claim the stolen funds as a loss on the victim’s annual tax return if the victim thought it was a legitimate investment. It may be possible to report the investment as worthless - assuming it's fully un-recoverable and won't be reimbursed or covered by insurance, etc. - and take a loss on Schedule D. The capital loss would be the cost basis in the lost crypto assets. 


Talk to a Kugelman Law crypto tax attorney for more information about tax reporting options available in your particular situation.

Civil Enforcement: Typically, we are not able to sue anyone involved in these types of investment fraud because most of the actors in these schemes are foreign. We are not law enforcement, of course, but we can help law enforcement build out their databases and use detailed reports to help locate your funds.


In order to attempt to recover the stolen funds, the scam should be reported to the victim’s bank, the Internet Crime Center (IC3), and local law enforcement.  


If you are a victim of a pig butchering crypto scam, then contact Kugelman Law tax and crypto attorneys today to discuss how we can help. 


It is important to have the following information available to provide:

  • Last date funds were sent
  • Last contact with scammer
  • California city of residency
  • Has a report been filed
  • Platform/address where money was sent
  • Total loss
Client Reviews
Alexander helped me break down my tax situation and used his expertise to figure out the next actionable steps, make sure that all the bases were covered (that I wasn't aware even existed), and confirm that things were done correctly. If you are confused and stuck in a difficult tax situation, Alexander will guide you forward and help you confidently resolve the issue. Henry Wang
If you are having tax trouble, Alexander is the one to help you. He was very professional, personable, and easy to reach. His explanation of the entire process is helpful for easing the stress that is associated with tax trouble. We never felt intimidated or out of the loop while working with him. The process was handled to our liking and we are satisfied with the results. Even the after care has been phenomenal! Tony W.
If anyone out there is in need of stellar legal tax assistance, look no further and contact Alexander Kugelman. He helped me tremendously with my tax situation and is always there to help when needed. If I can give Alexander more stars, I would because 5 stars is not enough! Thank you for everything, Alex!!! Flo Lauzon
Alexander has been a life saver! I got dragged into some serious IRS issues with a complicated foreign assignment component, which included divorce. Alexander has been working with me to resolve directly with the IRS. Alexander is detail oriented, responsive and I trust him to guide me. I will be using Alexander for all tax related matters from now on! He is stuck with me forever. Eve T.
Alexander helped me understand the IRS audit process and prepared my response. There were certain records that I had lost, but he suggested alternatives that the IRS accepted. Even better, he showed up at the audit for me and I never actually had to talk with the IRS. I didn't have to pay any penalties. I'd definitely recommend hiring Alexander to deal with an IRS issue. L.R.