Take Time During Money Smart Week to Learn the Warning Signs of Investment Fraud

04/24/2018 6:00 am EST


Dan Rutherford

Deputy Director, Office of Customer Education and Outreach, U.S. Commodity Futures Trading Commission


It is Money Smart Week, a time dedicated to programming across the country that helps consumers manage their personal finances better. Avoiding financial fraud is essential in managing your finances.

Taking the time to learn the signs can save you years of regret over potential losses to fraud. Check out these six red flags to look for when considering an investment or trading opportunity that involves futures or options on futures:

Superficial Signs of Legitimacy Online…: Fraudsters may go to great lengths to appear legitimate. For example, unregistered binary options or forex platform operators may present themselves as well-established companies by developing polished websites, promoting themselves through online ads, creating apps for smartphones and other devices, and establishing a strong social media presence. But in reality, they may not even have a physical presence in the U.S. Always review the CFTC’s RED list for foreign entities that currently appear to be acting in a capacity that requires registration with the CFTC but are NOT registered with the CFTC.

  1. …And Offline: Some fraudsters go to great lengths to establish an impressive offline presence as well. For example, Hunter Wise Commodities’ fraudulent precious metals investment operation included a sales staff, storage facility, partner brokerages, faked statements and company brochures. It looked like an impressive operation, but in reality, there was never any gold, silver, platinum, palladium, or copper at all. Don’t rely on these superficial signs as proof of legitimacy.
  1. Urgency: Think twice any time you’re told that an offer is available for a limited time or that a limited number of people will be allowed to invest. Pressuring you to rush into a decision is a classic tactic used by fraud perpetrators. They want you to hand over your money before you have time to research the trade—or them.
  1. Promising Huge Returns: Financial trades that offer the chance of significant returns all come with risk. Anyone who guarantees a profit on a trade involving futures or options on futures shouldn’t be entrusted with your money.
  1. Offering a "Favor": Con operators often create the illusion of friendship by offering—or even providing—a small favor in return for your agreement to invest with them. For example, they may claim they’re waiving the commission for your first trade or extending a deadline “just for you.” Legitimate financial professionals conduct business in a straightforward way; they don’t pretend to provide some clients special treatment out of friendship.
  1. Confusing Explanations: Fraudsters may intentionally use unfamiliar jargon or complex explanations to cloud the risks of an offer. Take the time to ask questions and dig into details, to be sure you understand the opportunity.

Keep an eye out for these telltale signs and learn more at SmartCheck.gov.

This article was prepared by the Commodity Futures Trading Commission’s Office of Customer Education and Outreach. The article is provided for general informational purposes only and does not provide legal or investment advice to any individual or entity. Please consult with your own legal adviser before taking any action based on this information.

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on COMMODITIES