How to Report Fraud During the Pandemic

Whistleblowing and Reporting COVID-19 Fraud During a Pandemic

There is an increased opportunity for individuals and companies to take advantage during the COVID-19 pandemic and illegally profit from the crisis for financial gain.  Because of this, there may be an uptick of violations of the False Claims Act related to the COVID-19 pandemic.

On March 20, 2020, Attorney General William Barr urged Americans to report suspected COVID-19 fraud schemes and directed the Department of Justice (DOJ) to prioritize the investigation and prosecution of COVID-19 related fraud schemes.

On March 23, 2020, The U.S. Securities and Exchange Commission (SEC) issued a statement communicating that its Enforcement Division is committed to investigating and prosecuting securities frauds to ensure that “Main Street investors are not victims of fraud or illegal practices in these  unprecedent market and economic conditions” arising out of the COVID-19 pandemic.

Similarly, The Commodity Futures Trading Commission (CFTC) issued a public advisory to be on alert for frauds seeking to profit from market volatility related to COVID-19 and to report the fraud in an effort to protect others from falling prey to fraudsters.  Because of recent market losses and the economic downturn attributed to the impact of COVID-19, fraudsters may claim to know of special insider knowledge, promise unusually large returns, or low costs to open accounts.  Fraudsters will use their fraud tactics during such a pandemic and will send “offers” that will appear in email inboxes and social media feeds.

The CFTC wants consumers to be aware of the common fraud tactics listed on its website, which include:

  • Oversized returns. This is the “wow factor.” The promise of big money is often paired with guarantees or promises of little or no risk.
  • Urgency. Fraudsters commonly push traders to act now, before market conditions change. Fear of missing out is a strong motivator, which is why this tactic is used so often. Pressure to act quickly should signal you to tap the brakes. Verify what you’re told. Get it in writing. And, get opinions from others you trust.
  • Credibility building. Would you give your money to just anyone? No. That’s why fraudsters generally use vague, unverifiable credentials such as “hedge fund genius,” “trading legend,” or “advisor to the biggest firms on Wall Street.” Check to see if the individual is registered with the CFTC or other regulators at cftc.gov/check.
  • Testimonials. Web platforms prominently display customer reviews. Social media pages show screen shots of happy customer statements showing hefty returns. These are also intended to gain your confidence by confirming other “real” people are doing this and succeeding, so it must be okay.
  • Reciprocity. Scams commonly offer a free gift in exchange for an email address. It could be a free demo, a free course or book, a few tokens, or other promises. However, once the fraudsters have the email address they go to work. The offers and asks get bigger and more frequent—until victims are bled dry.

 

COVID-19 Whistleblowers

The False Claims Act permits whistleblowers who come forward with information related to COVID-19 fraud to file a qui tam lawsuit against a defendant for defrauding the federal government. The whistleblower who is the first to raise allegations about COVID-19 fraud may qualify for financial awards under the qui tam provisions of the False Claims Act. The Whistleblower Program under both the SEC and CFTC provide monetary incentives to individuals who come forward to report possible violations under the Securities Act or the Commodity Exchange Act. To date, the SEC Whistleblower program has paid over $300 million to whistleblowers since the passage of the Dodd-Frank Act’s qui tam reward provisions.

For more information regarding whistleblower claims, please contact our office. This article provides an overview of whistleblower qui tam claims and rewards. Please no do not rely on the information contained in this article to determine whether you have a valid claim.

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