Washington, D.C. – The Commodity Futures Trading Commission (CFTC) issued a public advisory on July 30, 2024, warning of increasingly complex fraud schemes that target victims multiple times, often by the same criminal organizations. The advisory highlights a pattern of “relationship confidence fraud” – also known as “pig butchering” – followed by fraud-recovery scams and, ultimately, recruitment into money laundering operations.
According to Melanie Devoe, Director of the CFTC’s Office of Customer Education and Outreach, these schemes are not isolated incidents. Victims initially targeted by investment fraud are frequently re-victimized by promises of recovery, or pressured into participating in illegal financial activities. “These frauds in and of themselves are heinous crimes that leave victims with significant losses and broken-hearted. Then, the victims are harmed again by fraud-recovery schemes or convinced to open bank accounts and move stolen money,” Devoe stated.
The CFTC advisory details a three-stage process. The first stage involves establishing a false relationship with the victim, often through social media or text messaging. Perpetrators build trust and then introduce the victim to a fraudulent trading platform, typically involving cryptocurrency or foreign currency exchange. Initial trades are often presented as successful, encouraging larger investments, sometimes from retirement accounts or home equity loans. When the victim attempts to withdraw significant funds, problems arise, leaving them financially ruined.
The second stage involves “fraud-recovery scams.” Criminals contact the victim, claiming they can recover the lost funds for an upfront fee. These are advance-fee schemes with little to no chance of success, especially when funds have been converted into cryptocurrency.
The final stage involves recruiting victims to launder money for the criminal enterprise, often by opening bank accounts to move stolen funds. The CFTC emphasizes the difficulty of recovering funds once they are converted into crypto assets. The advisory urges investors to be cautious of unsolicited offers, verify the legitimacy of trading platforms, and be wary of promises of guaranteed returns.
The CFTC’s full advisory, “Fraud in Three Acts: Relationship Cons, Recovery Scams, & Money Laundering,” is available on CFTC.gov, along with a comprehensive repository of customer education materials designed to help investors protect themselves from fraud and violations of the Commodity Exchange Act.
Source: CFTC.gov
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