Financial investments consist of both direct investments, such as stocks and bonds, and indirect investments, such as mutual funds. Criminal fraud occurs when an individual intends to or actually deceives another through false representation. The intended victim relies on the false representation to their legal detriment. When financial investment and criminal fraud are combined, it can result in several different types of financial scams. One such financial scam is called affinity fraud.
Affinity fraud is a type of investment scam in which a person preys on an identifiable group of people. The individual promotes the investment scam while pretending to be a member of the group. In some cases, the fraudster is actually a member of the identifiable group.
Identifiable groups of people include:
These scams usually involve a pyramid, or “Ponzi”, scheme. Under a pyramid scheme, a new investor will give money to the perpetrator of the scheme. The money is then used to pay to someone who invested their money earlier.
The individual, who actually is or pretends to be part of the group, will first convince a respected member of the group for help. For instance, the target may be a religious or community leader. They will tell people about the new fraudulent investment opportunity on the scammer’s behalf. In many instances, the trusted leader will unknowingly be a victim of the scam too. People invest their money into the fraudulent scheme. The individual usually flees after collecting the investments, leaving the group without money or an investment.
Scams like this are based on trust and friendship. Thus, the close knit structure allows the scam to work with a wider group of people than if the individual approached strangers. Also, victims generally will not tell authorities or seek legal remedies. Instead, they frequently try to work things out within their group.
Affinity schemes are serious white collar crimes, and a conviction of involvement in an affinity scheme can not only subject you to a serious criminal sentence, but it can also have a very negative impact on your professional reputation. If you are accused of or charged with this type of scam, talk to a criminal attorney.
Last Modified: 06-25-2018 08:55 PM PDTLaw Library Disclaimer
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