Affinity fraud can entice people to invest in Ponzi schemes


It is tempting to invest in an opportunity that is seemingly risk-free. But these types of opportunities can be misleading or even illegal. A Ponzi scheme is an illegal investment scheme that could defraud innocent investors of thousands of dollars. Ponzi schemes are linked to affinity fraud.

Affinity fraud constitutes a Ponzi scheme that targets members of a specific group. For example, they may target those of a particular religion, those of certain minority groups, or those of a certain age.

What is a Ponzi scheme?

A Ponzi scheme occurs when the promoter of the fraud encourages someone to invest in a false scheme. They promise the investors that they will make a significant sum of money off their investment with little risk to the investor by investing the funds elsewhere. It seems too good to be true.

But instead of investing these funds elsewhere, the funds are simply used to pay those who invested in the scheme earlier and often a significant amount is kept by the promoters of the false scheme for their own personal benefit.

Eventually, the earlier investors cash out their share in the scheme and the scheme falls apart. The promoter of the scheme walks away with stolen funds, and the many duped investors are left with nothing.

How is affinity fraud like a Ponzi scheme?

The promoter of an affinity fraud scheme is or pretends to be part of the group targeted to be defrauded. The idea is to exploit a segment of the population that seems vulnerable and would risk investing in a scheme that is promoted as being low risk and high reward.

Often, the scheme starts by attracting leaders of these groups. The leaders do not realize they are being scammed. Still, because they are leaders, others in the group trust them and will also invest in the illicit scheme.

Help is available to victims of affinity fraud

Affinity fraud affects many marginalized groups. Sometimes, the lure of easy money is simply too tempting. Still, affinity fraud is illegal and can cause significant financial harm to its victims. Victims of Ponzi schemes, including affinity fraud, can seek the help of investment litigation professionals to learn more about what steps to take moving forward.