On March 18, the Commodity Futures Trading Commission (CFTC) issued a Customer Advisory warning the public to watch for fraudulent schemes attempting to profit from recent market volatility stemming from the COVID-19 (coronavirus) pandemic. The CFTC identified common fraud tactics often used during major news events (such as the spread of the COVID-19 pandemic), including the following:

  1. the promise of oversized returns;
  2. urgency to act before market conditions change;
  3. credibility building using unverifiable credentials (e.g., “hedge fund genius,” “trading legend,” or “advisor to the biggest firms on Wall Street”);
  4. testimonials from “real” people; and
  5. reciprocity by offering a gift in exchange for contact information.

Fraudsters also can act by taking advantage of individuals’ biases and emotions that influence investment decision making.

Although it is not a guarantee against fraud, the Customer Advisory urges individuals to rely on www.cftc.gov/check for information on advisers, brokers, commodity pool operators and retail foreign exchange dealers; checking out virtual currency trading platforms; and links to the websites of other regulators offering similar assistance.

The full Customer Advisory is available here.