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

One of Cambodia’s wealthiest businessmen has been hit with U.S. sanctions for allegedly playing a role in serious human rights abuses – including human trafficking and torture – tied to a pig butchering scam operation headquartered in the Southeast Asian country.

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.

In placing Ly on the Specially Designated Nationals list, the U.S. is barring all U.S. persons – including citizens overseas and residents living in America – from transacting with him in any way. This could have a serious impact on his business activities, sanctions experts said.

“Because many sanctions authorities authorize the imposition of sanctions on non-US persons – not ordinarily subject to US jurisdiction – for engaging in material transactions with an SDN, many non-US persons will now refuse to transact with Ly, irrespective of jurisdictional considerations,” said Brendan Hanifin, a Chicago-based partner at law firm Ropes & Gray. “Given the primacy of the U.S. dollar in international financial transactions, the practical effect of the SDN designation will be to cut off Ly’s access to most of the global financial system.”

Zachary Goldman, a partner at law firm WilmerHale and co-chair of the firm’s Blockchain and Cryptocurrency practice, said that the sanctions on Ly and his companies extends to all transactions that transit through the U.S. – including dollar-denominated transactions clearing through a U.S. financial institution, even when there are no Americans involved in the transaction.

Many banks, even those outside of the U.S., will not deal with OFAC-sanctioned persons, Goldman added.

Because the sanctions against Ly and his companies will drastically curtail their ability to transact with international counterparties, as well as to access capital, Hanfin said the SDN designation is likely “equivalent to a corporate death sentence.”

In addition to his business operations, Ly is a senator in the Cambodian People’s Party and an advisor to the country’s Prime Minister, Hun Manet. Before Hun Manet was elected Prime Minister, Ly was an adviser to his father, the former Prime Minister Hun Sen.

Victims are lured to O-Smach and similar compounds with the promise of employment opportunities, OFAC alleged, but once they arrive they have their phones and passports confiscated and are forced to carry out pig-butchering scams – a type of confidence-enabled investment scam in which the scammer seemingly befriends the victim over text using a fictitious identity and then entices them to invest large amounts of money into a fake cryptocurrency investment platform. According to a recent report from the Federal Bureau of Investigation, pig butchering scams cost victims nearly $4 billion in 2023.

If they try to escape or call for help, victims have reported “being beaten, abused with electric shocks, made to pay a hefty ransom or threatened with being sold to other online scams,” according to the Treasury Department’s Thursday press release. According to reports, at least two victims have jumped to their death from buildings at the O-Smach Resort.

The U.S. House Financial Services Committee will hold a hearing on pig butchering scams on Wednesday.

Edited by Nikhilesh De.