The Commodity Futures Trading Commission’s Office of Customer Education and Outreach (OCEO) today issued a customer advisory reminding the public that frauds may extend beyond one-time acts and that victims may be targeted multiple times—sometimes by the same criminal gangs.
It’s not uncommon for victims of trading frauds to also be targeted by fraud-recovery scams or recruited to launder money for criminal enterprises.
“We tend to see this in what we call relationship confidence frauds or what the perpetrators call pig butchering frauds,” said Office of Customer Education and Outreach Director Melanie Devoe. “These frauds in and of themselves are heinous crimes that leave victims with significant losses and broken-hearted. Then, the victims are harmed again by fraud-recovery schemes or convinced to open bank accounts and move stolen money.”
The CFTC’s advisory about relationship confidence scams and follow-on frauds reminds customers to:
- Never mix money with long-distance relationships.
- Be cautious of calls, text messages, letters, or emails from people or companies they’ve never contacted.
- Make sure trading platforms, or financial firms, are registered and headquartered in the United States. Visit cftc.gov/check for more information.
- Beware of government imposters. Contact the agency directly to verify calls, email, or messages. The government will never email, call, or text you demanding money. Learn more about imposter frauds.
About the Office of Customer Education and Outreach (OCEO)
OCEO is dedicated to helping customers protect themselves from fraud or violations of the Commodity Exchange Act through the research and development of effective financial education materials and initiatives. OCEO engages in outreach and education to retail investors. The office also frequently partners with federal and state regulators as well as consumer protection groups. The CFTC’s full repository of customer education materials can be found at cftc.gov/LearnAndProtect.
Customer Advisory: Fraud in 3 Acts: Relationship Cons, Recovery Scams, & Money Laundering is available in full below and on CFTC.gov.
*****
Fraud in Three Acts:
1. Relationship Cons
2. Fraud-Recovery Scams
3. Money Laundering
In many cases, fraud is a long story, not a single act. People who are victimized by one fraud are often victimized again and again.
Act 1: Relationship Tragedy
You may respond to a random text message or a stranger on social media who wants to start a relationship. Soon you’re texting every day, exchanging pictures, and you learn the person makes money by trading crypto assets or foreign currencies. Eventually, the “friend” offers to teach you how. You’re introduced to a trading website. You’re shown your successful trades and your account balance grows rapidly. You’re pressured to invest more by the “friend” who may even convince you to invest all the money from your retirement accounts or to mortgage your home.
At first, you might be able to withdraw a small amount of money, but try to take out large sums, or close the account, and suddenly there are problems. At the end of the fraud, you are left bankrupt and broken hearted. You may even owe a large tax bill to the IRS for prematurely removing funds from retirement accounts.
This type of fraud has many names, including crypto confidence investment fraud, financial grooming fraud, relationship confidence fraud, and the term the operators use, pig butchering fraud. Learn more about relationship confidence scams.
Act 2: A Comeback Story?
Recovering money lost to fraud is rare and more difficult if dollars are first converted to bitcoin (BTC), Tether (USDT), or other crypto assets. The criminals know this, so they may call you claiming they can get your lost money back.
Fraud-recovery scams are a form of advance-fee fraud—when you are asked to pay upfront for a bigger payoff later. In this case, you’re told your stolen money has been recovered, or it can be found, if you first pay a tax, fee, or retainer. Many times, the same gang or a different one pulls off both the original and recovery scams. Learn more about fraud-recovery scams.
Act 3: Breaking Bad
A possible third act is the promise of easy part-time work. The “job” offer is for you to open bank accounts or digital asset wallets to accept money or convert crypto to dollars, and then forward the money somewhere else. For payment, you keep some of the money. But the money was stolen from other fraud victims and this financial shell game is a form of money laundering that could land you in jail. The people who perform this fraud are called “money mules.” Learn more about money mule scams.
Protect Yourself
- Never mix money with long-distance relationships.
- Reverse image search any new internet “friends” and try to contact them through other means to verify their identities.
- Never send crypto assets or give sensitive information to anyone you’ve only known online.
- Be cautious of calls, letters, or emails from people or companies you’ve never contacted.
- Before trading crypto, check to see if the trading platform is registered with the Financial Crimes Enforcement Network (FinCEN) or your state as a money service business. Learn more at cftc.gov/check.
- Make sure any trading platform or financial firm has a headquarters in the United States. See if it looks like a legitimate business by doing a street-view map search of the address.
- Don’t trade in markets or products you don’t fully understand.
- Beware of government imposters. Contact the agency directly to verify calls, email, or messages you received.
