U.S. Treasury Sanctions Cambodian Tycoon With Ties to Pig Butchering Scams

Last week, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) announced the sanctions against Ly Yong Phat and several of his businesses, including conglomerate LYP Group and four of his hotels in Cambodia. One of Ly’s sanctioned hotels, the O-Smach Resort, is notorious for its use as a compound for human trafficking victims brought from across Asia and forced to work in pig butchering scam operations.

By adding Ly to the Specially Designated Nationals list, the U.S. is effectively preventing all American individuals – whether they are citizens abroad or residents within the country – from conducting any type of transaction with him whatsoever. This move could significantly hamper his business dealings, according to experts in sanctions.

As a crypto investor, I understand that due to various sanctions authorities allowing penalties against non-US individuals for significant transactions with Specially Designated Nationals (SDNs), many international parties might choose to avoid dealing with such entities, disregarding jurisdictional factors. This being said, considering the predominant role of the US dollar in worldwide financial dealings, the consequence of being labeled an SDN could be devastating, effectively severing access to a significant portion of the global financial system for the affected party.

Zachary Goldman, a partner at law firm WilmerHale and head of their Blockchain and Cryptocurrency department, stated that the sanctions against Ly and his companies apply to any transactions passing through the United States. This includes deals denominated in dollars that clear through an American financial institution, regardless of whether or not Americans are participating in the transaction.

Various banks, including those located abroad, tend to avoid transactions with individuals who are under sanctions by the Office of Foreign Assets Control (OFAC), as pointed out by Goldman.

As a researcher studying economic sanctions, I find that the designation of Ly’s companies on the Specially Designated Nationals (SDN) list could effectively restrict their capacity for international transactions and capital access. This restriction, as expressed by Hanfin, seems akin to a corporate death sentence due to the severe implications it carries.

Beyond managing his businesses, Ly also serves as a senator in the Cambodian People’s Party and provides counsel to the current Prime Minister, Hun Manet. Prior to Hun Manet’s election as Prime Minister, Ly held an advisory role for his father, the former Prime Minister Hun Sen.

Individuals are tricked into going to places like O-Smach and related locations under the pretense of job offers, as stated by OFAC. However, upon arrival, their phones and travel documents are taken away, and they’re compelled to participate in pig-butchering schemes – a form of investment scam that relies on deceit. In this scheme, the scammer pretends to befriend the victim through text messages using a false identity, then encourages them to invest large sums of money into a fictional cryptocurrency investment platform. According to a recent FBI report from 2023, losses due to pig butchering scams were estimated to be close to $4 billion.

If someone is in a precarious situation and attempts to flee or seek assistance, they have allegedly faced “physical assaults, electric shock torture, being forced to pay large sums of money as ransom, or facing threats of being passed on to other online scams,” as stated in a press release from the Treasury Department on Thursday. It has been reported that at least two victims, trapped in such situations, have tragically leapt from buildings at the O-Smach Resort.

On Wednesday, I’ll be keeping a close eye on proceedings of the U.S. House Financial Services Committee, as they delve into the intricacies of pig butchering scams in the crypto world.