Derivatives Regulator Warns of Fee Scams During Coronavirus Pandemic

By Mengqi Sun April 8, 2020 6:41 pm ET Fraudulent schemes that promise high returns from trading complex financial products—but force victims to pay excessive fees and taxes to collect earnings—increasingly target people working from home or who have lost jobs amid the coronavirus pandemic, a U.S. regulator said.

Newsletter Sign-up Risk and Compliance Journal Our Morning Risk Report features insights and news on governance, risk and compliance.Victims usually are introduced to unregistered brokers online through social media and messaging apps, such as Telegram and WhatsApp, the CFTC said.

Victims are shown text updates or statements that state the amount they invested is growing but are asked to pay high commissions, money transfer fees and taxes when they try to claim profits, according to the CFTC. The profits aren’t real and the swindlers disappear when the victims stop paying, the CFTC said.

The schemes described by the CFTC highlight the challenges individual investors face as they look for alternatives to the turbulence they face in the stock market, said John Nowak, a partner at law firm Paul Hastings LLP who specializes in securities law. Stocks have swung wildly in recent weeks as money managers grapple with how the pandemic has affected the value of businesses in every industry.The advisory can also be a note of caution for compliance officers at financial institutions, Mr.

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