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 you might think would know better.
Professional con artists are just that—professionals—and they 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?
- Contrary to popular belief, people who fall victim to financial scams are not just the most vulnerable or gullible.
- Report fraud to the authorities.
- Companies that promise to help you recover your money after a scam may be crooks too.
Listen to Your Suspicions
If the person you’ve been dealing with stops returning your calls, that 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 the Authorities
Approximately one in 10 adults in the U.S. 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 you are the victim of a scam, make sure to report it. Doing so may not only help you, it may also 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 (NASAA) website. You might also 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 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).
Beware of any unsolicited offers you receive to help you recover your money. Fraud-recovery con artists swim with scammers like pilot fish with sharks, swooping in to take more bites of what’s left of your cash. Be especially wary of any who ask for their fee in advance—a tactic that is illegal in itself, according to the FTC. Where do they get your name? Probably off a sucker list compiled and sold by the very crook who conned you in the first place.
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 timeline of events to make sure 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, e-mails, and other relevant documents. Canceled checks, for example, could help investigators trace where the money was deposited.
The total fraud losses in 2021, according to the FTC. The median loss was $500 per person.
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 you’ll be lucky to receive even pennies on the dollar. Still, you might get something back, whereas if you don’t report it at all, you’re sure to get nothing.
You might also be eligible for a tax deduction, as with some other types of thefts. 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.
How Do I Report Fraud to the FTC?
You can report fraud to the Federal Trade Commission (FTC) online via its complaint website. Be sure to document anything you can to add to your report, such as a telephone number or website, the name the caller gave, the time and date of a call or email, what information you were asked for, and anything else that might help identify the fraudster.
How Do I Report Fraud to FINRA?
If you believe you’ve been a victim of investment fraud you can file a report with FINRA’s Investor Complaint Center. An online form allows you to report complaints with brokers and brokerage firms. FINRA also provides links to file complaints with the Securities and Exchange Commission, the Commodity Futures Trading Commission, and National Futures Association.
What Is a Ponzi Scheme?
A Ponzi scheme is a type of investment fraud in which investors are promised high returns with little to no risk. Ponzi schemes generate profits for early investors by signing on new investors, whose funds are used to pay the earlier backers.
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 put a scam artist out of business for a while.