Fighting back against COVID scam artists
Pandemic isolation made what fraudsters do much easier
WASHINGTON — When it comes to fighting investment fraud, the first responders are often state securities regulators. And a new report finds they have been challenged, but not deterred, in catching con artists who’ve been striking during the COVID crisis.
In 2020, state securities officials, often working with federal agencies, initiated thousands of investigations that resulted in enforcement actions and criminal cases. These investigations raked in $42 million in fines and penalties and led to $306 million in court-ordered restitution to victims, according to a report by the North American Securities Administrators Association (NASAA), which represents state and provincial securities regulators in the United States, Canada and Mexico.
This type of crime-fighting is difficult even in good times. Victims are often too embarrassed to report they’ve been scammed. And even when the criminals are caught, much of the money they stole has already been spent. Add in a pandemic, which resulted in court closures, and the rescheduling of jury trials and grandjury proceedings, and 2020 was a very tough time for prosecuting con artists.
“The states did a tremendous job pivoting to handling everything … electronically and figuring out how to do that,” said Melanie Senter Lubin, NASAA’s president and Maryland’s securities commissioner.
NASAA’s annual enforcement report showed con artists fleecing investors in schemes involving everything from cryptocurrencies to precious metals. State regulators reported a surge in commodities fraud that frequently target seniors. Last year, they opened up 147 investigations of commodities schemes, up from 69 in 2019.
… In September 2020, 30 state securities regulators joined the Commodity Futures Trading Commission (CFTC) in filing a federal lawsuit against a company allegedly involved in a gold and silver investment scheme that bilked over $185 million from more than 1,600 investors. Most were seniors who lost their retirement money.
The enforcement action was the largest joint filing with state regulators in CFTC history.
The coronavirus made what criminals do easier. More people were home to answer their phones and were worried about a downturn in the stock market. Trapped at home, often isolated, people became more susceptible to the promise of better investment returns or fear police were on the way to arrest them for alleged crimes committed using their Social Security number. …
Internet and social media fraud were also prevalent. Scammers used people’s fears to pitch COVID cures or investments, such as a shortage of masks or hand sanitizer.
“By leveraging the popularity of platforms such as Facebook and Twitter and LinkedIn, scammers try to add legitimacy to their schemes, quickly establishing … credibility,” the NASAA report said.
The report also pointed to the effectiveness of rules based on NASAA’s “Model Act to Protect Vulnerable Adults From Financial Exploitation,” which mandates action when a financial professional believes a senior or vulnerable adult may be the victim of financial exploitation or is about to be victimized. To date, 32 jurisdictions have enacted rules or legislation based on the model rules, the NASAA report said.
To help state regulators, look out for these red flags:
You’re promised a low-risk, high return. Any promotion that uses the words “secure,” “guaranteed” or “safe,” along with a promise of a high return, is most likely a fraud. …
You’re pressed to recruit friends and family members. If your big payoff depends on recruiting others, you are probably being lured into a pyramid scheme.
You’re told a tax bill needs to be paid with a gift card. This is 100% a scam. No government agency will ask you to pay … in gift cards or wire transfers.
Contact your state securities regulator to check the seller is licensed and the investment being promoted is registered. Go to nasaa.org to find your state securities regulator’s office. There’s a link for “Contact Your Regulator.” Trust me, they want to hear from you before you hand over any money.
Help first responders keep you safe. Investigate before you invest.