Taking measures against fraud


Fraud is an ever-present risk to investors, as millions of people fall victim each year to Ponzi schemes and frauds involving market manipulation, advance fees and pyramid schemes. According to the FBI, these schemes often offer low- or no-risk investments with guaranteed or overly consistent returns.

They target groups of people who connect or have an affinity through common affiliations that are based often on faith, work, ethnicity, or other commonalities, to foster trust.

Recovering losses due to affinity fraud can be challenging, especially for those whose friends or loved ones also stand to lose substantial assets. But monitoring suspicious activity, taking timely action and alerting others to the scam will bring fraudsters to justice so that they cannot harm others.

What to do after discovering the fraud

The Commodity Futures Trading Commission (CFTC) has identified important measures to take for investors who have discovered a scam. Most of the money lost may be unrecoverable, but the focus should be on preventing future losses and gathering vital information while it is fresh:

  • Be wary of schemes to recover lost funds, as these additional frauds demand additional fees to release earning or principal or require upfront fees for recovery.
  • Collect all pertinent information, names, titles, website addresses, contact information, receipts and statements to establish a paper trail and timeline of the fraud.
  • Protect your identity and your accounts, including putting a fraud alert or credit freeze on your credit file.
  • Report the fraud at the federal and state level or seek legal advice on the best way to proceed.
  • Research insurance coverage for steps to financial recovery.

4 measures to protect against future exposure

As like-minded fraudsters seek similar targets, the victims of fraud must learn from previous mistakes and be on guard to future attempts from similar scammers. Some common-sense measures they can take include:

  1. Verifying the registration of brokers or trading platforms with national or state regulatory agencies to verify the legitimacy or history of the entity
  2. Getting a second trusted opinion on the source
  3. Not giving out payment information over the phone or by email or fund trades with unusual forms of payment
  4. Being wary of connections through third-party entities

Falling victim to a scheme once is enough for one lifetime. Taking legal steps to prevent it in the future makes sense and can also save others from becoming victims of financial fraud.