What Is Affinity Fraud?
Affinity fraud is a type of investment fraud wherein a con artist targets members of an identifiable group in light of things like race, age, religion, and so on. The fraudster either is or claims to be, a member of the group. Frequently the fraudster advances a Ponzi or pyramid scheme.
Figuring out Affinity Fraud
Affinity fraud leverages and takes advantage of the inherent trust inside the group. For instance, a fraudster may target a specific strict congregation. In many cases, the person will try to enroll the assistance of the leader of the group to market the investment scheme. In this example, the leader turns into an accidental pawn in the fraudulent scheme.
Casualties frequently fail to inform specialists or seek after their legal options and on second thought try to resolve things inside the group, especially when the fraudsters have manipulated regarded community or strict leaders to convince others to invest.
Affinity Fraud Examples
The U.S. Securities and Exchange Commission (SEC) investigates and makes a move against affinity frauds targeting a wide range of groups. Recent cases incorporated an ex-Marine's hedge fund that targeted individual military and an informal investor in Sugar Land, Texas, who defrauded investors among his kindred members of the Houston-region Lebanese and Druze people group. In another case, the SEC got an emergency court order to halt a continuous Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles.
Nonetheless, the biggest affinity fraud in history was executed by Bernard L. Madoff Investment Securities that loosened up in late November 2008. Madoff's own children handed him over after he confessed to the men that his business was a "monster Ponzi scheme". Madoff's firm worked a $50 billion Ponzi scheme that among numerous people and financial firms, likewise targeted numerous rich Jews, Jewish organizations, and charitable groups, including Yeshiva University, Maimonides School, Kehilath Jeshurun Synagogue, Ramaz, the SAR Academy, and Holocaust survivor Elie Wiesel's foundation and his personal savings. Madoff's scheme was uncovered during the economic collapse of 2008 which is very common since frauds will generally collapse in a weak economy as numerous investors try to pull out money out to cover deficits somewhere else.
Affinity Fraud Most Prevalent in the U.S.
The problem is global however best-archived in the U.S. A study of Ponzi schemes by Marquet International Inc. in 2011 concentrated on 329 major U.S. investment fraud cases discovered in the previous decade of no less than $1 million in losses and total reported losses of almost $50 billion. The most common affinity groups targeted by Ponzi schemers were the elderly or resigned; strict groups; and ethnic groups. These three target groups represented 85% of all the affinity group cases in their study.
As per The Economist, Utah sees the most affinity fraud per capita in the United States, in light of the fact that so many of the state's occupants have a place with the LDS Church community. Members of the LDS community will generally be incredibly trusting of other people who have a place with the congregation leadership, or who introduce themselves as having a place with it, making this community very powerless against this type of scam. In 2010 alone, Utahns lost an estimated $1.4 billion to affinity scams. Affinity fraud is most pervasive in Utah County, particularly in the region among Alpine and Provo.
- One of the most notable instances of affinity fraud is Bernard Madoff, where he targeting princely Jewish people group.
- Affinity fraud targets a specific demographic group.
- While affinity fraud happens globally, it is archived the best in U.S. models.