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Affinity Fraud

June 16, 2023

What is Affinity Fraud?

Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. The group could be a religious group, such as a particular denomination or church, or an ethnic group or immigrant community. It could be a racial minority. It could be members of a particular workforce — even members of the military have been targets of these frauds. Fraudsters target any group they think they can convince to trust them with the group members' hard-earned savings.

Affinity fraud almost always involves either a fake investment or an investment where the fraudster lies about important details (such as the risk of loss, the track record of the investment, or the background of the promoter of the scheme).

Many affinity frauds are Ponzi or pyramid schemes, where money given to the promoter by new investors is paid to earlier investors to create the illusion that the so-called investment is successful. In reality, even if there really is an actual investment, the investment typically makes little or no profit. The fraudster simply takes new investors' money for the fraudster's own personal use, often using some of it to pay off existing investors who may be growing suspicious. Eventually, when the supply of investor money dries up and current investors demand to be paid, the scheme collapses and investors discover that most or all of their money is gone.

What Can I Do to Protect Myself from Affinity Fraud?

Get educated! has numerous resources to teach investors how to avoid becoming victims of fraud.

Check out your investment professional's background.

Attend events put on by organizations like the SEC to learn about the latest trends fraudsters use and how to avoid them.

Avoiding Affinity Fraud

Investor Alert: Affinity Fraud

Stopping Affinity Fraud in Your Community (Spanish and Chinese (Traditional))

Ponzi Schemes

Pyramid Schemes

Affinity Fraud Cases

SEC Regional Initiatives to Fight Affinity Fraud

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