CFTC Issues Warning About Romance Scams Involving Commodities and Derivatives

Although we most frequently blog about the SEC and its whistleblower program, other federal agencies also have their own. One of those agencies is the US Commodity Futures Trading Commission (CFTC), which oversees all types of futures markets. This independent agency governs derivative markets, which includes futures, swaps, and some types of options.

Begun as a trading exchange for agricultural commodities, the CFTC now oversees a wide variety of commodities, including digital, such as cryptocurrency and foreign exchange markets (FOREX) that deal in foreign currency exchange.

There are legitimate ways for experienced investors to delve into digital assets like these. But many are led to believe that they are investing in something digital when they are actually being defrauded. Increasingly, it’s one by one of the oldest methods in the book: fraudulent dating and romance.

The Romance Scam, a/k/a “Catfishing”

Chances are you’ve heard about someone who lost money to an online paramour. They began an online “relationship” with someone met on dating apps or social media who then turned the conversation to financial affairs. They have likely never met this individual in person, and maybe never via video call. But in a short time, a person believes they have found love with someone they’ve only met online.

Once gaining the victim’s trust, the online paramour then utilizes that goodwill to begin asking their victim for money. These scams may be over quickly or go on for many years. Another name for this fraud is “catfishing.”

In many cases, the account is set up with pictures and information stolen from a legitimate social media account. Hiding behind a false identity means that they will say anything to get your attention, your trust, and eventually, your money.

Men and women of all ages can become the victim of a romance scam. The fraudster establishes a relationship and engages with them to gain their trust. Some may make plans to meet up in person, or even propose marriage, but neither promise is ever kept.

A big part of this “romance” is discussing financial affairs, including sharing bank information, and engaging in investments “for the future.” This can include “investments” in cryptocurrencies, precious metals, and FOREX.

Unfortunately, many who are involved in this type of “relationship” may not understand how futures work, nor that they are involved with a fraudster. Those who continue can find themselves scammed out of thousands. Many of these bad actors are overseas or obscure their origins to look as if they are out of the country. Their goal is to get to your money quickly and disappear just as fast. Once the money is gone, there may not be a way to recover anything.

In these romance scams, the person claims to have considerable knowledge of these investments, according to a report from the FBI. From there, victims are directed to a fraudulent website to invest a small amount of money, from which they earn “interest.” The fraudster then coerces the victim to “invest” increasing amounts of money, after which they are unable to withdraw anything. Fraudsters then stop communicating with the victim, who is left in the dark without their funds.

Spotting The Fraud

Any new relationship takes time to build. Someone interested in gaining the trust of their victim may engage in “love bombing,” the same technique used by religious cults to recruit new members. They lay on the affection thick, using terms of endearment like “darling,” “dear,” etc., and quickly declare how much they “love” the victim.

A fraudster will also:

• Avoid video calls because they won’t be able to hide their real identity. They will make an excuse to keep you from seeing them in real time.
• Avoid meeting in person for the same reason; that’s why many fraudsters target their victims outside of their own geographic area.
• Have a small digital presence, such as few pictures, few friends, and an account that is fairly new with little activity
• Ask for money in the form of preloaded gift cards or wire transfers.
• Ask you to establish a new bank account in your own name.

In many cases, the other party claims:

• They are living or working outside of the US
  • On an oil rig
  • On a military deployment, such as Iraq
  • As part of a church or other humanitarian organization
• They need financial help for a medical expense, travel arrangements, a visa, or to get them out of some type of trouble
• A sad story that needs your financial help so that they can “start a new life with you.”

Once the victim is under the fraudster’s spell, it becomes easy to convince the victim to begin “investing” in something they likely don’t understand, such as FOREX, cryptocurrency, and futures.

Bottom line: if you meet someone online who begins asking for money for investments such as FOREX, cryptocurrency, precious metals, or anything else, there’s a very strong chance that it’s a fraud. Do not send them anything. Stop communicating and block them immediately, then report the incident.

Becoming A Whistleblower

The CFTC needs your help in stopping romance frauds. Whether you have experienced such a “relationship,” know someone who has, or have insider knowledge of a romance scam involving digital investments, you can help end it by becoming a whistleblower.

The agency recently issued an alert discussing the information they need to investigate and stop romance scam fraud. In it, the CFTC requests that anyone who can provide:

• The names and addresses of any US-based individual who helps to perpetrate these types of schemes, such as:
  • Organizers
  • “Money mules”
  • Providers of technology
  • Bank employees who might be involved
• Information about how and where the money is collected and stored inside the US, such as banking information and any US-based digital asset exchanges.

This information can be reported directly to the FBI via their Internet Crime Complaint Center website. Additionally, you can also:

• Correctly complete and submit a Form TCR (Tip, Complaint, Referral), with as much information as possible
• Provide timely information that is specific and credible
• Include as much information about the fraud as you can
• Attach any documents you have (as long as they are not part of any attorney-client privilege)
• You can also submit additional documentation via fax, email or postal mail
• Consider filing this same information with the FBI, the SEC, and other relevant government agencies

This information can help stop futures-based frauds, and save others from losing money with romance scams.

Retaining Experienced SEC Whistleblower Attorneys

Whistleblowers help everyone by notifying the SEC of conduct that harms the investing public, while also earning financial compensation for themselves. Hiring experienced SEC counsel may greatly increase the probability that the SEC initiates an investigation based on your information. If you wish to remain anonymous, you must be represented by an attorney, who will submit everything on your behalf.

Silver Law Group and the Law Firm of David R. Chase jointly have experienced SEC whistleblower lawyers, including a former SEC Enforcement attorney on the team, so you will always have guidance throughout the process. Our SEC whistleblower attorneys can help you if you have information regarding securities or investment fraud, violations of federal securities laws, false filings, market manipulation, or other misconduct. You must provide timely, credible, and original information or analysis to be eligible.

Contact us through our online form or at (800) 975-4345 for a consultation. Our attorneys work on a contingency fee basis. This means that it costs you nothing to hire us, and we collect our fees only if you receive an SEC bounty. Because we get paid when you do, we have the incentive to help you collect the maximum award available.