Affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. Some of the common interests include a religious beliefs, ethnic groups, immigrant communities, racial minorities, and members of a workforce. Various methods are used to access or target the groups. One common way is to persuade leaders from within to endorse the scheme. Sometimes the leaders do not even know that they are endorsing a scam, and they may end up becoming one of the victims of the fraud themselves. Because of the tight-knit structure of some of the groups, it can be quite challenging for regulators or law enforcement officials to detect affinity scams. Fraud victims often fail to notify the authorities in time, or they will try and work things out internally. This particularly true where the fraudsters have used respected community or religious leaders to convince members to join in on the investment.
Affinity fraud usually involves either fake investments or lies about important details such as an investment's risk/reward. Most affinity fraud cases stem from Ponzi schemes, where new money raised by the promoter gives money to earlier investors to create the illusion that the investment is yielding successful returns. This particular scheme makes no profit at all. Eventually, when the supply of new investor money dries up, and earlier investors demand to be paid, the scheme collapses and investors discover that they have lost most or all of their money.
The following tips will help investors avoid affinity fraud schemes:
•1) Always research the background of the person making the investment no matter how trustworthy the person seems to be.
•2) Do not make an investment based solely on the recommendation of a fellow member.
•3) Do not fall for investments that tout extravagant profits or guaranteed returns.
•4) Beware of any investment opportunity that cannot be put in writing.
•5) Do not be pressured into buying an investment you have not had time to adequately research.
Do you believe you are a victim of affinity fraud? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.