I Think I’ve Been Scammed! What Do I Do?

Contrary to popular perception, it’s not just the most vulnerable or gullible among us who fall prey to financial scams. The list of Bernard Madoff’s Ponzi scheme victims, to cite one famous example, included any number of people who you might think would know better.

Professional con artists are just that—professionals—and are very good at what they do, whether it’s credit repair scams, COVID-19 scams, or whatever might be the latest twist. Despite a wealth of information on how to spot and avoid scams here at Investopedia and on the websites of government agencies that deal with the problem every day, many people still find themselves sucked in. What should you do if you become one of them?

Listen to Your Suspicions

If the person with whom you’ve been dealing stops returning your calls, this could be a sign that something is amiss. If you aren’t receiving regular account statements, or if your statements show unexplained losses or consistent returns despite the ups and downs of the market, those could be signs as well. And if you get the runaround when you try to make withdrawals, your money could be long gone.

Report It to Authorities

Approximately one in 10 adults in the United States are victims of fraud each year, and collectively, they lose billions of dollars annually, according to the Financial Industry Regulatory Authority (FINRA). These statistics only account for people who report fraud. Many don’t.

If you suspect that you are the victim of a scam, make sure to report it. Doing so not only may help you but also may prevent others from falling prey to the same scam.

Agencies that might be of assistance depending on the nature of your complaint include the Federal Trade Commission’s (FTC) complaint website, your local FBI office, your state attorney general, and your state’s securities regulators. You can find contact information for that last group at the North American Securities Administrators Association’s (NASAA) website. You also might want to consult a private attorney, especially if your loss was substantial.

Investment fraud victims can file reports via the FINRA Investor Complaint Center. It has an online form that investors can use to report problems with brokerage firms and brokers, as well as links to file complaints with the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the National Futures Association (NFA).

Make Careful Notes and Save the Evidence

FINRA recommends creating a “fraud file.” This entails gathering documentation related to the fraud and keeping it in a secure location. Depending on the nature of the scam, your file should at the very least include a written time line of events to make sure that you can remember exactly what happened and the alleged scammer’s name and contact information.

Also, keep copies of any account statements you received, along with canceled checks, emails, and other relevant documents. Canceled checks, for example, could help investigators trace where the money was deposited.

Don’t Blame Yourself

Even though you may have missed what now seem like obvious red flags, you aren’t the first and, sadly, you won’t be the last. So, don’t be too hard on yourself. Remember, you aren’t the criminal. The one who stole from you is the criminal.

Finally, Don’t Expect Too Much

Unfortunately, your odds of getting all your money back are pretty slim. Most experts say that you’ll be lucky to receive even pennies on the dollar. Still, you might get something back, whereas you’re sure to get nothing if you don’t report it at all. 

You also might be eligible for a tax deduction, as with some other types of thefts. Internal Revenue Service (IRS) Publication 547, Casualties, Disasters, and Thefts, explains what to do. Note that some of the special tax rules enacted in the aftermath of the Madoff scandal now apply to the victims of Ponzi schemes. 

The Bottom Line

Of course, the best way to deal with financial scams is to avoid them in the first place. Still, if you’re ensnared by one, by all means report it, both for your own good and that of others. If nothing else, you might have the satisfaction of helping to put a scam artist out of business for a while.