How it works
The scam runs for weeks or months. The victim is contacted, often through a wrong-number text or dating app, built into a relationship, shown a fake trading platform with fabricated returns, encouraged to deposit more, and then blocked when they try to withdraw. The name refers to fattening the victim before slaughter.
Why it matters
Because the victim intended to invest for profit, the IRS concluded in CCA 202511015 that the loss can qualify as a theft loss under Section 165(c)(2), which is deductible in full. Documentation decides the case: screenshots, chat logs, wallet addresses, transaction records, and a law enforcement report.
Example
Over four months a victim deposits 150,000 dollars into a platform that shows a 400,000 dollar balance. The platform demands a tax payment to release funds, then disappears. The deductible loss is the 150,000 dollars actually transferred, not the fictitious balance.
Related: crypto theft loss. Read more: pig butchering scams and tax losses.
