What are the warning signs of affinity fraud?


Perpetrating a securities fraud scheme, like a Ponzi scheme or other plot designed to take investors’ money, requires that the fraudster build up trust with investors.

After all, investors who do not trust a broker are very unlikely to give their hard-earned money over to her in order to invest.

There is a documented history of fraudsters in this country using a technique called affinity fraud in order to continue their misconduct. To perpetrate affinity fraud, the fraudster will target a demographic group based on religion, ethnicity or other common bonds.

The group is usually close-knit enough to automatically give considerable trust to other members. The fraudster thus will either actually be a member of the group or will put on a clever enough ruse to convince the group that he belongs to it.

With built in trust, it is very easy for fraudster to continue a Ponzi scheme or other unlawful investment device designed only to make the fraudster rich, and not to protect the investors’ assets.

One sure sign of affinity fraud is a person over-playing her group identity

Any group can be targeted for affinity fraud. For instance, there is a documented record of Mormons in Utah losing millions of dollars to fraudsters playing off a Mormon identity.

To give another example, one of the best known fraud schemes in history involved the Jewish community.

It’s okay for people to use their membership in a close-knit group to attract business if that business is legal.  It is also okay for the members of that group to want to deal with one of their own.

However, it is a warning sign if a person heavily emphasizes her identity but is lean on the specifics of the investment products she is offering.

It also may be suspicious if a person is only marketing to members of a community who give him considerable trust but seems to stay away from potential customers who might view him with a more critical eye

Victims of affinity fraud have options

As with any other fraud, victims of affinity fraud should consider their legal options carefully. Even if they cannot recover compensation from the fraudster, other parties may be responsible. The firm of Timothy J. Dennin, P,C. has successfully represented victims of affinity fraud and recovered monies lost and made victims whole.