According to reports, investment scams that target members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups is referred to as Affinity Fraud.
The criminals who promote affinity scams are often members of the group. They may enlist respected community or religious leaders from within the group to spread the word about the scheme by convincing those people that a fraudulent investment is legitimate and profitable. Many times, those leaders also become victims of the scammer’s game.
Because of the close community structure of these groups, it can be difficult for law enforcement officials to detect an affinity scam. Victims often fail to notify authorities or pursue their legal remedies and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment.
Examples of affinity scams would be a “Ponzi” or pyramid scheme, where new investor money is used to make payments to earlier investors to give the false illusion that the investment is successful.
New investors are tricked into investing in the scheme, meanwhile existing investors feel safe and secure. In reality, the fraudster almost always steals investor money for personal use. Both types of schemes depend on a stream of new investors.- when the supply of investors finally comes to a halt, the whole scheme collapses and investors discover that their money is gone.
5 Tips for Avoiding Affinity Fraud:
- Never make an investment based solely on the recommendation of a member of an organization or religious or ethnic group to which you belong.
- Do not fall for investments that claim to be “risk-free” or promise spectacular returns. If it seems to good to be true, it probably is.
- Be cautious of any investment opportunity that is not in writing or if it is declared to be “confidential”.
- Never be pressured or rushed into a “once-in-a-lifetime” opportunity. Take time to do your homework.
- Beware of Internet solicitations with “can’t miss” investment opportunities.
The foregoing information is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee. For more information on the firm and it’s representation of investors, visit https://www.whitesecuritieslaw.com.
For more investor information visit http://www.sec.gov.
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