The Commodities Futures Trading Commission (CFTC) is warning people about scams related to coronavirus. - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

Investigating Spoofing, pool

The Commodities Futures Trading Commission (CFTC) is warning people about scams related to coronavirus.

March 23, 2020

Fraudsters commonly use major news events, such as the spread of COVID-19, to add credibility to their cons or manipulate emotions. You can better protect yourself by learning to recognize common mental biases that everyone has, as well as common fraud tactics—and by taking a few preventative steps. Reporting frauds you encounter can also help protect others during these challenging times,” the CFTC stated in their release.

“Trading and investing come with a number of biases and emotions that influence decision making. Recent market losses due to the impact of COVID-19 may motivate some traders to recoup losses, while others may seek safety.” The CFTC continued, “Fraudsters know this and design their pitches to appeal to these instincts. Examples include claims of special insider knowledge or insights, promises of unusually large returns, guarantees, surefire trading signals, or low costs to open accounts. And these offers are timed to hit your inbox or social media feed when you are most interested.

“The common advice is ‘if it looks too good to be true, it probably is.’ But frauds are often successful because they do look good. The problem, even for experienced traders, is that when biases get in the way, they make it difficult to recognize what’s too good. Numerous studies have revealed that those who are more financially literate and experienced are more likely to be victimized by investment fraud. It could be correlation: Those who are more financially literate are more likely to trade and therefore more likely to encounter fraud. Or, as some researchers believe, overconfidence could cause some traders to skip important due diligence.”

The frauds the CFTC warns about take on similar characteristics to other frauds, only these involve the coronavirus as their hook.

The CFTC warns about oversized returns, “This is the ‘wow factor.’ The promise of big money is often paired with guarantees or promises of little or no risk.”

Frauds often come with a limited time offer, CFTC also stated, “Fraudsters commonly push traders to act now, before market conditions change. Fear of missing out is a strong motivator, which is why this tactic is used so often. Pressure to act quickly should signal you to tap the brakes. Verify what you’re told. Get it in writing. And, get opinions from others you trust.”

Fraudsters also claim to have credibility, but CFTC warns these are often based on vague credentials, “Would you give your money to just anyone? No. That’s why fraudsters generally use vague, unverifiable credentials such as “hedge fund genius,” “trading legend,” or “advisor to the biggest firms on Wall Street.”

The CFTC has set up a website, cftc.gov/check to verify that anyone selling derivatives is registered with the CFTC, which they legally must be.

“One of the best ways to protect yourself from fraud is to check to first see if the person or company selling you advice or asking for your money is or has been registered with the CFTC. Registration is no guarantee against fraud, but it does mean that registrants have passed rigorous background checks and proficiency tests, and firms meet certain financial and customer protection requirements,” the CFTC stated.

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