By Andrew Cross, Anna Smith-Sandy

On April 6, 2020, the Commodity Futures Trading Commission (“CFTC”) Office of Customer Education and Outreach (“OCEO”) published an additional customer advisory (“Advisory”) cautioning the public regarding potential fee scams. OCEO noted that many of these schemes are now targeting individuals that may be financially impacted by the Coronavirus pandemic. OCEO previously published a Customer Advisory on March 31, 2020 regarding potential fraudulent schemes posing to take advantage of market volatility related to the pandemic. (See our blog post on this advisory here).

In a related press release, CFTC Chief Communications Officer and Director of Public Affairs Michael Short stated “[o]ne of the best defenses against becoming a victim of fraud is being informed . . . We will continue to provide the public with resources to help detect and avoid fraud during this volatile period.”

Key characteristics of this type of scam include the following:

• Communications are initiated often through social media or messaging apps.

• The initial communications will often show reports of payouts that are fake statements intended to convince customers that others are making money through the program.

• Customers are asked to make an initial deposit and subsequently will receive updates or statements showing extraordinary gains.

• When customers try to claim their gains, they are told they need to pay the company certain fees to withdraw from their account. However, the company never transfers money from the account and continues to ask for fees until the customer finally refuses or the company disappears.

The Advisory provides the following key takeaways:

• Risks, fees, and commissions should always be disclosed before accounts are opened.

• Never pay more money to withdraw from your own account.

• Most individual speculators will pay taxes on gains when they file their personal income taxes. U.S. brokers will not collect or withhold taxes from trading accounts.

• Do not pay for trading advice, or pay people to trade for you, if they are not registered with the CFTC or other U.S. regulators, like a state securities regulator or the U.S. Securities and Exchange Commission. You can check an individual or company’s registration status with the CFTC on the CFTC website.

Good day.  Good to be vigilant, especially of scams! DR2.