Customer Advisory: Beware of Fee Scams Targeting Workers

Customer Advisory: Beware of Fee Scams

Targeting Workers Sidelined by COVID-19

The Commodity Futures Trading Commission advises the public that unregistered

brokers selling binary options, foreign exchange (forex) programs, and cryptocurrencies

are targeting people who lost their jobs due to the coronavirus outbreak. The scams are

primarily conducted on social media and via messaging apps. The fraudsters convince

their victims they can earn unrealistically high profits from home, but later force the

victims to pay excessive “fees” and “taxes” to get their supposed earnings. The profits

are not real and the fraudsters disappear when the victims stop paying.

What to Consider

Trading forex, binary options, and digital assets is

highly risky. No program, automated trading system,

or individual can guarantee returns of thousands of

dollars in just a few hours or days of trading.

In fee scams, the earnings are never real. The

fraudster’s goal is to get investors to pay the upfront

deposit and later pay ridiculously high commissions,

taxes, and fees. The promise of huge profits is

dangled in front of the investors to make the fees and

taxes look like a small percentage of what they’ve

earned. But when all is said and done, the investors

are out their deposits, and the money they’ve spent

chasing their phony earnings.

Always remember:

• 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, especially if you have only met online, communicated

through messaging apps, or if they operate outside the United States.

• Designated contract markets for binary options and retail forex dealers also must be

registered with the CFTC before they can solicit U.S. customers. Check

their registration

status before you deposit any money.

How Fee Frauds Happen

Victims are typically introduced to the phony brokers online. Sometimes, a member of a

Success is Easy to Fake

Online

Social media and online videos are full of

people claiming to be instant millionaires

and Wall Street wizards, but take all that

with a grain of salt. Profiles, websites,

past trades and profits can be easily

faked. Here are some warning signs of

“brokers” you should avoid:

• You only engage online; you can’t

identify the broker’s physical

location or headquarters.

• The broker communicates via

messaging apps.

• You’re asked to pay in Bitcoin or

other digital assets.

• You’re promised or guaranteed

unrealistic returns in a short

amount of time.

• The broker or firm is not registered

with the CFTC; to check, visit

cftc.gov/check.

•

The broker or firm operates

outside the United States.

discussion or group will recommend a broker who’s making him or her a lot of money. Many of

these frauds sell the victims on affiliate plans that will boost their profits if they recruit others into

the scheme, making them unwitting participants in the fraud. The group post is typically

accompanied by a link to a Telegram chat, Whatsapp number, or other messaging app.

In the messaging app, victims may see reports of payouts to other traders. These are fake

statements that are meant to convince traders that other people are making money in the

program. The names and amounts are not real. The customers are told that if they join the

broker’s program, by paying the upfront deposit, they will receive tens of thousands of dollars in

a very short amount of time—commonly a few hours, days or weeks. Often, the customers are

shown small, medium and larger amounts they can deposit; the more they pay, the more they

will make or the faster it will accumulate. Sometimes the customers are directed to a website to

provide their payment information, or may be asked to pay the deposit directly to the broker’s

wallet using bitcoin or other digital assets.

Once the deposit is made, investors receive live text updates or regular statements showing

how fast their money is supposedly growing. At the end of the required investment period, the

broker has exceeded all expectations. Except, when the investors try to claim their $15,000 or

$25,000 in gains, for example, they’re told they first have to pay a $1,500 commission. When

they pay the commission, they are told they have to pay another $800 in taxes. When they pay

the taxes, they are asked for another $200 in money transfer fees, and so on until the customer

finally refuses to pay or the fraudster disappears. In the complaints received by the CFTC, the

dollar amounts vary, but this pattern is consistent.

Preying on At-Home Workers and the Unemployed

The CFTC has received hundreds of fee fraud complaints in recent months, however these

frauds are now targeting those who have become recently unemployed or are now working from

home because of the coronavirus outbreak. More group discussions now talk about how easy it

is to earn money from home or make money trading with no experience.

Before making any trade or investment, be sure you fully understand how the markets function,

the products you are trading, and the fees, commissions, and risks involved. Ask people

providing you advice or trading on your behalf where they are physically located—ask for an

office address—and if they are registered with the CFTC. If they say “yes,” ask for their

registration ID number, and verify their registration information at cftc.gov/check

before

depositing any money. If you are sent to a trading platform, be sure that company is registered

too. Registration is no guarantee against fraud. However, it does indicate that individuals have

passed thorough background checks and specific proficiency tests, and that firms and trading

platforms meet certain financial and customer protection requirements.

If you believe you’ve been a victim of fraud, submit a tip at cftc.gov/complaint.

This article was prepared by the Commodity Futures Trading Commission’s Office of Customer Education and Outreach. It is

provided for general informational purposes only and does not provide legal or investment advice to any individual or entity.

Please consult with your own legal adviser before taking any action based on this information. Reference in this article to any

organizations or the use of any organization, trade, firm, or corporation name is for informational purposes only and does not

constitute endorsement, recommendation, or favoring by the CFTC.