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Affinity Fraud and How to Avoid Becoming Prey

By February 6, 2019Fraud

Affinity fraud is an investment scam that targets potential investors that belong to a specific group, such as religious or ethnic communities, professional groups, racial minorities, the elderly, etc. Scammers will pretend to be members of a particular group in order to develop a rapport and attempt to convince potential investors that their investment is legitimate and worthwhile. In reality, it’s nothing more than a scam.

While many of the fraudsters are not licensed or have any ties to the investment industry, affinity fraud also occurs by brokers and other investment professionals. This article provides an overview of affinity fraud and steps you should take to not only avoid a scam, but also what you should do if you believe you are a victim of this illegal practice.  


Developing a Rapport

Affinity fraud takes advantage of an established trust between groups of people who share a common faith, hobby, profession, race, or other similarity. These groups are typically tight-knit and weary of involving outsiders, and may even be fearful that reporting such a scam will cause them to lose respect within their respective community.

The core of a successful scam is developing a rapport with the victims. Scammers will spend time learning about the group, targeting specific members, and looking for various ways to win their trust. They may attend group social outings, volunteer, establish inroads with group leaders and strive for acceptance amongst all members. Once the scammer has portrayed himself as someone worth trusting, he or she will persuade group members to invest, usually with the promise of massive payouts from a small investment of money or time.  

The scam is typically framed as a “get rich quick” notion. In some cases the fraud may be an elaborate pyramid scheme, and it others it may even be a Ponzi scheme. Established brokers may prey on unsophisticated investors to invest in a business that, in reality, never did exist. However, the mere reputation of a broker and the rapport developed with the victim is enough for some investors to fall for the trick.      


Avoiding Affinity Fraud

It’s very important to take time to thoroughly research your potential investment. Do some digging on the party offering the investment. If he or she is not registered to provide investing advice or offer an investment, that can be an immediate red-flag. However, as noted above, even registered brokers engage in affinity fraud.

Additionally, look for information about the proposed investment on the internet. If you cannot find much information about the individual or the investment, seeking the advice of a qualified attorney can help you avoid being a victim of a scam. Not surprisingly, many affinity fraud schemes take place online, either through websites or via email. If you believe you have received an email or been have been taken to a website that may be a scam, consult an attorney that can help you research into specifics and determine the real purpose of the investment.


Be Skeptical and Take Your Time

It is important to know that you should never sign up for any sort of investment after merely hearing about it. Make sure you are provided detailed information in writing that you can review both individually, and with an attorney. Many scammers will make a verbal pitch, and most will sound very convincing. Avoid putting things in writing or requests for your money without any sort of formal agreement. It is also important to not rush into an investment simply because the person doing the selling is putting on the pressure.

Affinity fraud is extremely dangerous by nature. It seeks out vulnerable groups and preys on what the potential investor believes are traits they have in common. Be wary of any investment that seems too good to be true, or requires an immediate or quick investment—whether the “opportunity” comes from your broker, an unsolicited email, or someone you encounter on the street. If you believe you have encountered or have fallen victim to affinity fraud, consult a qualified and experienced attorney to advocate on your behalf and bring these fraudsters to justice.

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