Fraud Prevention Month Series
Fraud in Canada: An Ongoing Series for Payment Businesses
March is Fraud Prevention Month in Canada — a reminder that fraud doesn’t just affect individuals, it threatens the businesses and financial infrastructure Canadians rely on every day. We’ve been running an ongoing series spotlighting the fraud trends most relevant to payment service providers, money services businesses, and the merchants we work with.
More in this series
Today, we’re turning our attention to one of the most sophisticated and fast-evolving scams hitting the crypto sector: the Pig Butchering Scam.
In the evolving landscape of cryptocurrency fraud, the Pig Butchering Scam has emerged as a sophisticated menace, particularly targeting over-the-counter (OTC) desks in the crypto sector. Originating from Southeast Asia and named for the way scammers “fatten up” victims before extracting their funds, this scam has caused billions in losses globally, with an estimated $4.4 billion siphoned in 2024 alone. For Canadian PSPs like Apaylo, which services merchants including crypto exchanges, understanding this scam is crucial to prevent reputational damage, regulatory scrutiny, and financial harm.
Traditionally, Pig Butchering involves building long-term trust—often through fake romantic or social relationships—before luring victims into fraudulent crypto investments. However, a new variant targets crypto OTC desks directly. Bad actors pose as legitimate foreign OTC desks seeking partnerships to service high-net-worth clients in Canada. They market themselves as trusted partners, offering lucrative commissions of 3-6% on trades and providing “hot sales leads” to Canadian desks. This sounds too good to be true—and it is. Initial trades appear smooth, building confidence over months. But eventually, refund requests flood in from victims who realize they’ve been defrauded, often losing life savings.
The mechanics are insidious. Scammers use scripted interactions to cultivate relationships, then direct victims to spoofed trading platforms controlled by the fraudsters. Funds are funneled through large credible exchanges before being transferred to criminal wallets, often laundered via mixers, cross-chain bridges, or decentralized exchanges (DEXs). In Canada, OTC desks partnering with these imposters face severe fallout: reputational tarnishing, investigations by law enforcement like the RCMP, loss of banking relationships, and potential direct losses if refunds are mandated.
A recent U.S. Department of Justice seizure of $580 million in crypto linked to Southeast Asian scams illustrates the scale, involving “pig butchering” networks that exploit human trafficking for operations. Globally, flows from these scams averaged $27.8 billion annually from 2021-2023, with funds moving through major exchanges and stablecoins like Tether. Canadian desks are not immune; the CAFC reports surging investment frauds, often starting with social media or dating apps but evolving to target businesses.
Engaging in these activities reflects a lack of moral compass, prioritizing short-term gains over ethical practices. At Apaylo, we take a firm stance: any merchant found collaborating with such agents will be off boarded immediately. Compliance with FINTRAC requires robust due diligence on partners, including verifying identities and monitoring transaction patterns for red flags like unusual high-value transfers or links to high-risk jurisdictions and vulnerable populations.
To mitigate risks, OTC desks should implement enhanced KYC protocols, use blockchain analytics for tracing funds, and train staff on scam indicators—such as unsolicited high-commission offers or leads from unverified sources. Regulatory bodies like the Office of the Superintendent of Financial Institutions (OSFI) emphasize cybersecurity and third-party risk management in crypto dealings.
The broader implications extend to financial stability. As crypto adoption grows—10% of Canadians own crypto assets—these scams amplify vulnerabilities, potentially eroding trust in the sector. Apaylo urges merchants to prioritize integrity, aligning with Fraud Prevention Month’s call to action.
In conclusion, the Pig Butchering Scam preys on greed and trust, but vigilance and ethical decision-making can thwart it. Apaylo remains committed to a secure ecosystem, offboarding risks to protect all stakeholders.
