Article: 6 Steps to Take after Discovering Fraud
You just realized you were scammed. That trade or investment you made was a fraud. Now what do you do?
The sooner you take action, the better you can protect yourself and help others. Getting all of your stolen money back may prove difficult, but recovery is about more than just regaining your losses. These six steps can help you guard against further theft, report the fraud, and start the recovery process. They are for informational and educational purposes only and should not be considered legal or investment advice or a comprehensive list of solutions. You can also conduct these steps on your own at little or no cost. However, if you feel you need legal help, consult an attorney.
Your first steps should focus on stopping further losses and gathering the information you have about the scheme and the perpetrators while it is still fresh. Then, report the crime as soon as possible. The sooner you report, even if you think the matter is insignificant, the easier it’ll be for authorities to track down the fraudsters or stop others from being victimized. Next, look into how you can repair the damage and avoid fraud in the future.
1. Don’t pay any more money
This may sound obvious, but some schemes use the promise of large returns to persuade victims to send one fee after another, even when the victims suspect something is wrong. These fee frauds have increased significantly online in recent months. Typically, legitimate brokers will deduct fees and commissions from your account, and not demand more money to release your earnings or principal. U.S. brokers will never withhold or collect taxes.
Also, be on the lookout for recovery frauds. These frauds target recent victims and claim to be able to get the stolen money back if the victims first pay an upfront fee, “donation,” retainer, or back taxes. The perpetrators of these advance-fee frauds often pose as government officials, attorneys, or recovery companies. Learn more about the warning signs of recovery frauds.
2. Collect all the pertinent information and documents
While the events are still fresh in your memory, develop a timeline and collect documents and information that could help when it comes time to report or investigate the fraud. Write down conversations you had with the fraudsters with the approximate dates and times they took place. Documents and information to collect and keep include:
Resolution when Working with Registered Entities
- Names, titles, or positions used by the fraudsters.
- Social media profiles, group posts, chats, or other online interactions.
- Website addresses and screen shots.
- Emails and email addresses. Save these electronically, or print them out with the full header information. (Your email provider or a web search can describe how to capture header information.)
- Phone numbers you used to contact them.
- Account information, statements, trade confirmations, disclosures, and sales materials.
- If credit cards were used, include the receipts or statements.
- Exchanges of digital currencies, such as bitcoin.
- Records of other forms of payment including cancelled checks or receipts for wire transfers, money orders, or prepaid cards.
- Any correspondence received, including envelopes.
3. Protect your identity and accounts
If you provided payment information to the fraudsters, take the steps necessary to block access to your accounts and protect against identity theft.
- Credit cards. If you used credit card information in the fraudulent transaction, contact your card issuers immediately to make a fraud report. As part of the process, you may be required to get a new account number.
You may also want to contact one of the three national credit reporting companies (below) and ask that it place a fraud alert on your credit file. The credit reporting company you contact will automatically report the fraud alert to the other credit reporting companies. A fraud alert will notify potential creditors to verify your identity before extending additional credit in your name. Placing a fraud alert is free and typically lasts up to one year or until you ask for it to be removed.
You can also request a free security freeze. A security freeze restricts access to your credit file, making it harder for identity thieves to open accounts in your name. You will have to contact each credit reporting company to place a freeze. A security freeze will not be lifted unless you request it.
• Security freeze
• Security freeze
• Security freeze
- Bank automated clearing house (ACH) information. If you gave the fraudster your bank account number or routing number, contact your bank or credit union immediately. You may need to close the account and open a new one.
- Social security number. Go ahead with a fraud alert or credit freeze and report your information stolen at the FTC’s identitytheft.gov website. Be on guard for scams that claim your social security number is linked to back taxes or other debts. Independently verify claims with the IRS or creditors before paying any money.
- Log-ins and passwords. If you registered for access to a fraudster’s website using usernames or passwords that you use elsewhere, be sure to update accounts with new log-ins as soon as possible.
- Other steps to protect your identity. If you experience identity theft, you can report it and get further recovery steps at identitytheft.gov.
Two Ways to Submit a Complaint to CFTC
4. Report the fraud to authorities
Tell us if you believe you were victimized by a fraud that involved commodity futures, options on futures, swaps, commodity pools, binary options, foreign exchange, digital assets, or other derivatives.
If you have experienced other types of fraud and don’t know where to send your complaint, the Department of Justice has a directory that can help. Also, federal agencies work closely together and will forward your complaint to the appropriate agency.
If the fraud occurred in your local community, you could also report the matter to the police and your district attorney. You may need to file a police report if you plan to file an insurance claim for fraud losses.
5. Check your insurance coverage, and other financial recovery steps
- Fraud theft insurance. Check your homeowner’s policy to see if it includes coverage for fraud losses or reimbursements for identity theft related expenses. It may be limited to your principal investment and not expected profits, or it may cover only expenses incurred to fix problems caused by the identity theft.
- Consider consulting a tax professional. If you can itemize deductions on your personal income tax return, fraud losses may be deductible in the year the fraud was discovered. Calculating the deduction can be complicated and certain exceptions may apply. For more information, see IRS Publication 547, Casualties, Disasters, and Thefts, and other resources for investment fraud victims from the IRS.
- Consult a financial counselor or advisor. Losses to retirement savings or that caused significant debt may require the help of a professional financial advisor. Beware of credit repair companies that promise to significantly erase your debt. A financial advisor can help examine your current situation and provide a path to rebuild savings, reduce spending, minimize interest expenses, or identify other possible sources of income.
- Recovering money lost to fraud. If you want to consult a lawyer or company to recover money lost to fraud, be sure to ask what services will be provided, the costs involved, how you will be charged, and get all of the answers in writing. Check with your local bar association to ensure attorneys are licensed in your state or if they have a history of complaints. Be aware that, in many cases, asset recovery companies charge high fees to do little more than send a demand letter to the original fraudster and a boilerplate complaint to the appropriate regulator. If the scammer is insolvent, the demand letter will do little good, and you can submit complaints to government regulators at no cost.
6. Consider changing behaviors and building your resistance to fraud.
As the saying goes, “fool me once shame on you, fool me twice shame on me.” Don’t blame yourself for being victimized. Fraudsters are very good at what they do, and they often target educated and successful people. However, you may want to consider the events or actions that led up to the fraud. Many times, routine activities can lead people into becoming targets, and returning to those activities could start the process over again. These routine activities could include being active in investor social media groups or chat rooms, commenting on videos, signing up for trading courses, special offers, free giveaways, or investor newsletters.
While the exact numbers are unknown, because fraud is commonly underreported, victims tend to be victimized more than once. Recovery frauds, mentioned above, commonly start from victim lists sold on the dark web. Your personal details and vulnerabilities may be sold to other scammers. One of the best ways to build your resistance to fraud is to stay informed. Here are some Do’s and Don’ts to help you avoid fraud again.
- Do verify the registration and disciplinary history of any broker, adviser, or trading platform with the CFTC, NFA, SEC, FINRA or the appropriate state regulator before doing business with them. While registration alone cannot protect you from fraud, most frauds involve unregistered individuals, entities, or products.
- Stay current on the latest frauds and schemes by monitoring credible sources such as state and federal government or law enforcement agencies, including the CFTC, SEC, Department of Justice, FTC, the Consumer Financial Protection Bureau, FINRA, National Futures Association (NFA), your state securities regulator, or attorney general’s office.
- Get a second opinion from a trusted adviser, family member, or friend before making an investment. Seeking advice from someone you know and trust is good way to slow down a sales pitch and avoid fraud.
- Let unknown callers go to voicemail or have a refusal script ready to end cold calls quickly. “I don’t participate in phone solicitations,” then hanging up, works just fine.
- Delete—don’t open—unsolicited email. Often, opening an email will signal a spammer that the email account is active and more spam will follow.
- Verify business addresses by doing an online map search and looking at the location using the street-level view. Many fraudulent websites will use fake addresses, which can be easily spotted with a virtual visit.
- Review privacy settings on social media platforms and conceal or delete information that pinpoints where you live, where you went to college, what you do for a living, where you trade or bank, how often you invest, etc. Personal information can easily be pieced together by fraudsters and used to target you for future schemes.
- Check email addresses carefully to avoid phishing attacks.
- Learn about the common persuasion tactics fraudsters use.
- Don’t respond to unsolicited sales calls or email.
- Don’t give credit card, payment information, or personal information over the phone, in an email, or to a website that is sent as a link in an email. Fraudsters often pose as financial service professionals or government officials. Instead, end the call or close the correspondence, and look up the customer service contact information on your own.
- Don’t fund trades or investments by wiring money, sending prepaid credit or gift cards, using digital assets such as Bitcoin, or making other unusual forms of payment.
- Don’t communicate using encrypted messaging apps with “brokers” or others promising to make you money. These apps provide global access and hide the true location of the person on the other end. You could easily be dealing with an offshore fraudster posing as a person in the United States.
- Don’t trade or invest in vehicles you don’t fully understand. If you can’t explain it, you probably shouldn’t invest your money in it.
- Don’t engage with people promoting investments or trading schemes on social media. Especially don’t engage with people who promise they are “legit” even though all the others are scams.
- Don’t trade or invest with unregistered entities or individuals that operate outside the United States.
- Don’t engage with people you are introduced to through third parties or organizations. Affinity fraud targets people through social groups and use those connections to build credibility. Places of worship, professional organizations, service organizations, and others are common targets for affinity fraudsters.
- BASIC Database, National Futures Association
- Better Business Bureau Scam Tracker
- CFTC Customer Education and Outreach Office
- CFTC Whistleblower Program
- Consumer Financial Protection Bureau
- Local FBI Field Offices
- Federal agencies that accept fraud complaints
- Federal Trade Commission
- Internet Crime Complaint Center (IC3)
- National Association of Attorneys General (find your state attorney general)
- North American Securities Administrators Association (find your state securities regulator)
- SEC Center for Complaints and Enforcement Tips
- Task Force on Market Integrity and Consumer Fraud
- U.S. Postal Inspection Service