You have just discovered that you have been scammed. The trade or investment you made was a scam. What can you do now?
The sooner you take action, the better you can protect yourself and help others. Getting all of your stolen money back can be difficult, but recovery is about more than just recovering your losses. These six steps can help you protect yourself from further theft, report the fraud and begin the recovery process.
They are for informational and educational purposes only and should not be considered legal or investment advice or a comprehensive list of solutions. You can also take these steps yourself at little or no cost. However, if you feel you need legal help, you should consult an attorney.
Your first steps should focus on preventing further losses and gathering the information you have about the scam and the perpetrators while it is still fresh. Then report the crime as soon as possible. The sooner you file a report, even if you think the matter is minor, the easier it will be for authorities to track down the scammers and prevent further victims from being harmed. Then, consider how you can repair the damage and prevent fraud in the future.
1. Stop Paying Money
This may sound obvious, but some scammers lure their victims with the promise of big profits to make them transfer one fee after another, even if the victims suspect something is wrong. These fee scams have increased significantly online in recent months. As a rule, reputable brokers deduct fees and commissions from your account and do not ask for more money to release your earnings or capital. U.S. brokers will never withhold or collect taxes.
Also watch out for clawback scammers. These scammers target recent victims and claim they can get the stolen money back if victims first make an advance fee, a “donation,” a retainer or back taxes. Perpetrators of these advance fee scams often pose as government officials, attorneys or debt recovery companies. Learn more about the warning signs of recovery scammers.
2. Gather All Pertinent Information and Documents.
While the events are still fresh in your mind, make a timeline and gather documents and information that can help you when it comes time to report or investigate the scam. Note the conversations you had with the scammers, with the approximate dates and times they took place. Documents and information you should collect and retain include:
- Names, titles or positions used by the scammers.
- Social media profiles, group posts, chats or other online interactions.
- Website addresses and screenshots.
- Emails and email addresses. Save them electronically or print them out with full header information. (Your email provider or a web search can describe how to capture header information.)
- Phone numbers you have used to contact you.
- Account information, statements, trade confirmations, disclosures, and sales records.
- If credit cards were used, attach receipts or statements.
- Exchanges of digital currencies such as bitcoin.
- Records of other forms of payment, including voided checks or receipts for wire transfers, money orders, or prepaid cards.
- Any correspondence received, including envelopes.
3. Protect Your Identity and Accounts
If you have given payment information to the scammers, take the necessary steps to block access to your accounts and protect yourself from identity theft.
Credit Cards. If you used credit card information in a fraudulent transaction, contact your card issuer immediately to file a fraud report. You may need to obtain a new account number in the process.
Also contact one of the three national credit reporting agencies (see below) and ask that a fraud alert be placed on your credit file. The credit reporting agency you contact will automatically forward the fraud alert to the other credit reporting agencies. A fraud alert alerts potential creditors that they must verify your identity before extending further credit in your name. A fraud alert is free and usually lasts for up to one year or until you request that the alert be lifted.
You can also request a free security freeze. A security freeze restricts access to your credit file and makes it harder for identity thieves to open accounts in your name. You must contact each credit reporting agency to request a freeze. A security freeze will only be lifted at your request.
Automated Clearing House (ACH) information from the bank. If you have given the scammer your account number or bank routing number, contact your bank or credit union immediately. You may need to close the account and open a new one.
Social Security Number. Initiate a fraud alert or credit freeze and report the theft of your information on the FTC’s identitytheft.gov website. Be wary of scammers who claim your Social Security number is linked to back taxes or other debts. Verify claims independently with the IRS or creditors before paying any money.
Log-ins and passwords. If you signed up to access a scammer’s website with usernames or passwords you use elsewhere, update your accounts with new log-ins as soon as possible.
Other steps to protect your identity. If you have been affected by identity theft, you can report it at identitytheft.gov and learn about additional steps to recover.
4. Report the Fraud to The Authorities
Tell us if you believe you have been the victim of a scam involving commodity futures, options on futures, swaps, commodity pools, binary options, foreign exchange, digital assets, or other derivatives.
If you have been affected by other types of fraud and don’t know where to send your complaint, the Department of Justice offers a directory that can help. Federal agencies also work closely together and will forward your complaint to the appropriate agency.
If the fraud occurred in your community, you can also report the matter to the police and the district attorney. You may need to file a police report if you intend to file an insurance claim for fraud losses.
Also contact your state financial regulatory agency or attorney general. State authorities may also file a claim in state court.
5. Review Your Insurance Coverage and Other Financial Recovery Steps.
Fraud Theft Insurance. Check to see if your homeowner’s insurance policy covers damage from fraud or reimbursement for expenses related to identity theft. Coverage may be limited to your principal investment rather than anticipated profits, or it may only cover the cost of fixing problems caused by identity theft.
Consider consulting a tax advisor. If you can claim deductions on your personal income tax return, fraud losses may be deductible in the year the fraud was discovered. Calculating the deduction can be complicated and certain exceptions may apply. For more information, see IRS Publication 547, Accidents, Disasters, and Thefts, and other IRS resources for victims of investment fraud.
Contact a financial advisor or counsellor. Losses of retirement assets or significant debt may require the help of a professional financial advisor. Beware of credit repair companies that promise to pay off a significant amount of your debt. A financial counselor can help you examine your current situation and point you in the direction of a way to rebuild your savings, reduce your expenses, minimize your interest expense, or develop other possible sources of income.
Recovering money lost to fraud. If you want to contact an attorney or company to recover money lost to fraud, be sure to ask what services will be provided, what the charges will be, and how they will be calculated, and get all the answers in writing. Check with your local bar association to see if the attorneys are licensed in your state or if there have been any complaints in the past. Be aware that asset forfeiture firms charge high fees in many cases to do little more than send a demand letter to the original scammer and a formulaic complaint to the appropriate regulatory agency. If the fraudster is insolvent, the demand letter will be of little use, and you can file a complaint with state regulators at no cost.
6. Think About How You Can Change Your Behavior and Strengthen Your Resistance to Cheating.
As the saying goes, “Fool me once, shame on you; fool me twice, shame on me.” Don’t blame yourself if you become a victim. Scammers are very good at what they do, and they often target educated and successful people. However, you should consider the events or actions that led to the scam. Often, it is routine activities that lead to people being targeted, and when they return to those activities, the process can start all over again. These routine activities may include being active in investor social media groups or chat rooms, commenting on videos, signing up for trading quotes, special offers, free giveaways or investor newsletters.
The exact numbers are not known, but since scams usually go unreported, victims tend to be victimized more than once. The recovery scams mentioned above usually start from victim lists sold on the dark web. Your personal information and vulnerabilities can be sold to other scammers. One of the best ways to protect yourself from scams is to stay informed. Here are some do’s and don’ts to help you avoid scams.
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