What is a Affinity Fraud

Fraudsters who commit affinity fraud exploit the trust and friendship that exists in tight-knit groups. Investors are frequently tempted to invest their money in a particular investment if they hear that their friends or family, or members of a group they belong to are buying it.

The fraudsters involved in affinity scams are often trusted members of the community. Con artists prey on their group ties or recruit a respected member of a group to promote their schemes by convincing them that a fraudulent investment is legitimate. Investors tend to be blinded when a con artist comes across as likeable or trustworthy.

Affinity fraud typically involves either a fake investment where the fraudster makes empty promises to investors and lies about important details of the investment. Many affinity frauds are Ponzi schemes, where payment of supposed profits to earlier investors using funds collected from newer investors to create the illusion that the so-called investment is successful and legitimate. In reality, wrongdoers are syphoning investor funds for their own personal use, often using some of it to pay off existing investors who may be growing suspicious. Eventually, the Ponzi scheme comes to a crashing halt when the supply of investor money dries up and investors discover that most or all of their money is gone.

Targets of Affinity Fraud

Fraudsters target any group they think they can convince to trust them and then steal the hard-earned savings of members of the group. The SEC has investigated and brought enforcement action against affinity frauds targeting a wide spectrum of groups, including groups and communities with common ties, such as:

• Elderly/Senior Groups
• Church Members / Religious Groups
• Ethnic Groups
• Immigrant Community Groups
• Racial Minority Groups
• Professional Groups
• Military Groups
• Union Members

How to Avoid Affinity Fraud

Any investing opportunity involves some degree of risk. To minimize risk, it is important to ask questions and learn about any investment before buying it. The key to avoiding affinity fraud is using independent sources to assess financial opportunities instead of blindly trusting the  judgment of a friend, family member, or co-worker. The Securities and Exchange Commission’s (SEC) has provided investor’s guidance on ways to avoid affinity fraud, such as:

• No matter how trustworthy the person who brings the investment opportunity to your attention seems to be, make sure to research the person’s back-ground, as well as the investment itself –.
• Be aware that the person telling you about the investment may have been fooled into believing that the investment is legitimate when it is not.
• Always check the background of an investment professional.
• Never make an investment based exclusively on what a member of an organization or group to which you belong.
• Do not fall for investments that promise spectacular profits or “guaranteed” returns.
• Be skeptical of any investment opportunity that you can’t get in writing.
• Don’t be pressured or rushed into buying an investment before you have a chance to research the “opportunity.”

Contact Riera Law to Recover Your Losses

Riera Law represents investors who have been scammed or lost money in an affinity fraud. If you suspect that a so-called investment opportunity may be an affinity fraud – or think that you may have lost money in an affinity fraud – contact us today, and let Riera Law fight for you to recoup your losses!