Beware the Scam Trying to Steal Your Retirement

Beware the Pig Butchering Scam Trying to Steal Your Retirement

A disturbing new breed of financial fraud has increasingly set its sights on your hard-earned retirement savings.

Dubbed “pig butchering,” it involves scammers carefully fattening up their victims with promises of high returns before ultimately slaughtering them by taking all of their money.

The moniker reflects the nature of the scam. Just as pigs are raised and fattened before they are slaughtered, scammers will spend a long time building trust with their victims and convincing them to invest their money.

Once the victims have invested significant funds, the scammers will suddenly disappear, leaving the victims with nothing. This scam is arising all over the country, including in Georgia.

Building Bonds for the Con

While many pig butchering scams begin on dating sites, scammers have recently moved to business sites like LinkedIn. In fact, LinkedIn has become a popular platform for these scammers because it is a place where people are looking to connect with professionals and build relationships.

Scammers can use this to their advantage by creating fake (but realistic looking) profiles and pretending to be a person’s professional or intellectual peer. They can then target their victims by connecting with them and building trust over time.

Once the scammers have built rapport with their victims, they will start to introduce investment opportunities, claiming to have unique insider knowledge.

One of the most popular tactics is to introduce the victim to “crypto futures” or “crypto contracts.” These supposed experts convince victims these platforms are safer than keeping money in their 401(k) or investing in actual cryptocurrency.

Scammers will promise their victims high returns on their investment. They may even offer to help them get started – pooling the victim’s money with their own to show them how it’s done.

Some scammers will even allow the victims to withdraw money on their early returns, convincing them the opportunity is real and prompting them to reinvest with bigger and bigger deposits.

Emptying Retirement Accounts and Triggering Tax Bills

Scammers are targeting well established professionals — that is people who’ve had time and resources to build up sizable retirement accounts. Promising “safe returns not found elsewhere,” these fraudsters often convince victims to transfer substantial sums from their 401(k)s or IRAs.

Fraudsters often convince victims to transfer substantial sums

Remember, however, that you have to pay income tax on withdrawals from traditional (non-Roth) retirement accounts. In addition to income tax, you may also have to pay a 10% early withdrawal penalty if you withdraw retirement funds before you reach age 59½.

So, if you withdraw $100,000 from your 401(k) at age 55, you may have to pay $35,000 in income tax and $10,000 in early withdrawal penalties, for a total of $45,000.

Unfortunately, victims of pig butchering scams who transferred money from retirement accounts do typically still owe taxes on the amounts withdrawn, even if the funds were stolen by fraudsters. However, there are some possible recourses for obtaining tax relief:

  • File a theft/fraud case report with authorities and submit a Form 4684 to the IRS declaring those funds as stolen. That would categorize it as a theft-loss deduction. How much relief is obtained may vary.
  • Pursue a Private Letter Ruling from the IRS requesting an exception if significant hardship can be demonstrated and reasonable diligence taken. These determinations are made case-by-case.

Contact the Law Offices of Alyssa Maloof Whatley for help in building your legal argument.

The warning signs that could indicate a scam

Warning Signs

Is someone trying to “fatten you up”? Here are some of the warning signs that could indicate a pig butchering scam:

  • Unsolicited contact: Some scammers may contact you “by mistake” through social media, messaging apps, or email. They may sound like they were trying to reach someone else, but after you correct their error, they continue communication. They try to connect with you on a personal level, often by sharing personal information or expressing interest in your life.
  • Quick relationship building: The scammer may try to quickly build a relationship with you, often by flattering you or making you feel special.
  • Promises of high returns: The scammer may promise you significant returns with little or no risk. They may pressure you to invest quickly, often by giving you a limited-time offer.
  • Moving the conversation to WhatsApp: The WhatsApp messaging platform offers a high degree of privacy and security, allowing scammers to communicate with victims without fear of interception. The app’s encryption features make it difficult for authorities to track down scammers and gather evidence.
  • Fake investment platforms: The scammer may direct you to invest in a fake or fraudulent investment platform. The platform may look legitimate, but it will be designed to steal your money.
  • Difficulty accessing your funds: Once you have invested your money, you may have difficulty withdrawing it from the platform. The scammer may make excuses or delay your withdrawals.

Be wary of unsolicited messages. If you are contacted by someone you don’t know, be cautious about sharing personal information or investing money with them.

Before investing in any opportunity, take time to research the company or platform carefully. Check with the Better Business Bureau (BBB) and the Securities and Exchange Commission (SEC) to see if there are any complaints or red flags.

Finally, don’t let yourself be pressured to invest. If someone is pushing you to act quickly, or keep a “tip” to yourself, that’s generally a red flag.

If you are considering an investment opportunity, particularly one that involves moving money out of your retirement accounts, it’s a good idea to seek advice from a professional financial advisor.

What To Do if You’re a Victim

What To Do if You’re a Victim

If you think you have been a victim of a pig butchering scam, you should report it to the FBI’s Internet Crime Complaint Center (IC3) and the Federal Trade Commission. You may also file a police report with your local law enforcement.

These steps are important because it documents the theft and can help our government track down these scammers. Documentation can also help you if you need to make a case to the IRS, asking for tax relief on money you no longer have.

If you’re facing a tax bill as the result of a financial scam, contact the Law Offices of Alyssa Maloof Whatley now. We can help you apply for settlement relief and penalty abatements.

The-Law-Firm-of-Alyssa-Whatley

Alyssa Maloof Whaltey

My goal is to make the tax resolution process as easy and stress free as possible so you can get back to focusing on the things that bring you joy.

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