Article: Don’t Let Fraud Make You Feel Foolish
Fraud is a crime, just like robbery or burglary. Instead of using violence, fraudsters use lies and tricks. The losses can cause significant financial and psychological trauma, from losing your life’s savings and experiencing financial hardships, to stress, anxiety, depression, and thoughts of suicide. To find mental health services in your area, visit FindTreatment.gov.
It is natural for any victim to feel ashamed or blame themselves. Should I have known the offer was “too good to be true?” How could I fall for this scam? But this doesn't have to be your only feeling. Many people report fraud because it gives them a sense of justice, even if they know they may not get their money back. Others report fraud because they know the information they provide will prevent others from being victimized.
Your best defense is knowledge — knowing how to recognize and avoid frauds and how to minimize harm if you are victimized.
Five Frauds to Recognize
Below are common frauds you should learn more about. Use the links below to understand how the frauds work, do’s and don’ts, and additional resources. Also, visit the CFTC’s Whistleblower Program to learn more about the CFTC’s enforcement authority.
- Financial grooming fraud
International criminal gangs have defrauded Americans of at least $3.5 billion through a sophisticated online scam that lures victims in through promises of romance and riches. The gangsters contact their victims through “wrong number” texts, or fake social media/dating profiles, and then spend weeks or months grooming them by building trust and making them believe they are in a new relationship. Eventually, the scammer introduces the idea of making money through crypto or forex trading. The victim may make money on the first trade, but after the gangster has stolen everything possible, he/she disappears with the victim’s money. The perpetrators of this scam refer to this fraud as “pig butchering.” - Digital asset frauds
These include fraudulent trading platforms, pump-and-dump schemes, and Ponzi schemes.- Trading platform frauds: These sites commonly offer “investing programs” that promise huge guaranteed returns. But, there is no such thing as a risk-free transaction or a guaranteed money-making opportunity. It all looks great, until you try to withdraw your money and run into one fee, tax, or roadblock after another.
- Pump-and-dump schemes: Pump-and-dump scammers use social media platforms, messaging apps, or message boards to hype up little known tokens they control or can easily manipulate. The scammers begin by manipulating the price upward. As more people join the buying, the price goes higher. When the tokens’ prices reach a target high (only known to the scammers), the scammers sell off the worthless tokens, the price falls, traders run for the exits, and many customers are left with nothing.
- Ponzi schemes: Ponzi schemes take many forms, but one involves traders soliciting money to invest in digital assets and usually come with the promise of guaranteed returns. Instead of investing the money, the fraudster steals it and uses some to pay fake “returns” to prior investors, but most of the money funds a lavish lifestyle for the fraudster.
- Forex frauds: Foreign currency trading frauds come in many flavors too, but each promise high returns or “win” rates. Frauds typically center around an unregistered trading platform, someone willing to share their secret trading signals, software that will trade for you, or the opportunity to trade with a proprietary trading firm’s money and “share” the profits. Typically, victims who send money (commonly crypto assets) lose it all.
- Precious metals frauds: These frauds promise “safe” investments, but inflated prices, high commissions, and excessive ongoing fees, make it impossible for victims to ever profit. The fraudsters tend to target older investors, convincing them to rollover their retirement accounts to self-directed IRAs and invest in precious metals.
- Imposter frauds: These involve scammers who impersonate government officials, law enforcement officers, billionaires, or celebrities to steal money from unsuspecting victims.
Reporting Helps
Reporting suspected fraud to regulators and law enforcement can help. Your information could be the necessary lead in a case that helps protect others. Complaint data is analyzed to identify developing fraud trends, illustrate the scope and scale of the schemes, and used to alert the public. Additionally, if you submit a whistleblower tip that leads to a successful enforcement action, you may be eligible to receive 10 to 30% of what the CFTC collects through the CFTC’s Whistleblower Program.
However, reporting fraud does not guarantee it will lead to an investigation or that you will get your money back. It is very difficult to recover money lost to fraud. See 6 Steps to Take after Discovering Fraud for additional information.
Report to Regulators
Regulators can bring civil charges and sue for penalties that may help repay victims. The government will never ask you to pay money to work on your case or help recover your losses. Depending on the products, markets, and facts involved, the following agencies may be able to help:
- Submit a Whistleblower tip or complaint to the CFTC
- National Futures Association
- Your state’s financial regulator
- Securities and Exchange Commission
- FINRA
- Federal Trade Commission
Report to Law Enforcement
When it comes to reporting fraud, your best bet is covering all the bases — with local, state, and federal authorities. Law enforcement can bring criminal charges. Report the fraud to:
- Your local police department
- Your local district attorney’s office
- Your state’s attorney general’s office
- The FBI
Details You Can Provide
If you submit a complaint, here are some details to consider including to help investigators:
- How you were initially contacted (social media platform, dating app, “wrong-number” text, etc.)
- Name and contact information of person who contacted you
- Photo of person who contacted you
- Company name and contact information
- If you withdrew over $10,000 to invest, your financial institution’s name and address
- Name, address, and bank account information where you sent your money, if applicable
- What you were told about the offer (guaranteed returns, insider information)
- In total, how much you sent or lost
- Trading app type and name
- Trading website address
- If the fraud involved digital assets:
- If applicable, type of prepaid cards used or crypto-asset kiosk location
- Digital asset(s) or financial product(s) you believed you were trading
- Sending wallet custodial exchange name
- Sending wallet public address
- Receiving wallet custodial exchange name, if applicable
- Receiving wallet public address
- Transaction hash or identification (txid)
- If you received “profits,” the sending wallet public address
- If you received “profits,” the sending wallet custodial exchange name
- If the fraud involved foreign currencies,
- The currencies you traded
- If the fraud involved precious metals
- Where your metal shipped from
- Where it shipped to
- Name and address of self-directed IRA company, if applicable
- IRA transfer forms
- Name and location of metals depository holding your metal
- Type of metal purchased
- Mention if you were told coins had collectible or “numismatic” value. Indicate this added value
This article was prepared by the CFTC’s Office of Customer Education and Outreach. It is provided for general informational purposes only and does not provide legal or investment advice to any individual or entity. Please consult with your own legal advisor before taking any action based on this information. This advisory references non-CFTC websites, and organizations. The CFTC cannot attest to the accuracy of information in those references. Reference in this article to any organizations or the use of any organization, trade, firm, or corporation name is for informational purposes only and does not constitute endorsement, recommendation, or favoring by the CFTC.