Affinity fraud is the name for the type of fraud where people put undeserved trust in someone offering an investment opportunity because that person is “someone like me.” Affinity fraud works because people trust other people who may share a common bond, such as family, religion or some other group affiliation. The list goes on and on. Over the years I have reported on many instances of affinity fraud perpetrated against a wide variety of people. Scammers take advantage of every connection they can make with their victims to gain their trust and then steal their money. Recently, Philip Elvin Riehl was charged by the Justice Department with conspiracy, securities fraud and wire fraud in regard to a 60 million dollar scheme that according to the Department of Justice “targeted members of the Mennonite and Amish communities in Pennsylvania and elsewhere and is one of the largest Pennsylvania-based alleged Ponzi schemes in history.” As you are aware, a Ponzi scheme is an investment scam where the criminal makes a scam seem like a legitimate investment by paying older investors with the money from newer investors while keeping the money for himself. Perhaps the most notorious Ponzi schemer was Bernie Madoff.
Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository. This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her. You can also check with your own state’s securities regulation office for similar information. Many investment advisers will not be required to register with the SEC, but are required to register with your individual state’s securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators Association. Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators Association. You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular investment adviser.
It is also important to remember that you should never invest in something that you do not completely understand. This was a mistake that many of Bernie Madoff’s victims made. You also may want to check out the SEC’s investor education website at www.investor.gov. Scammers can be very convincing and it may sound like there is a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours. Additionally, investing with someone merely because you share the same heritage, nationality, religion or any other affinity is something you should avoid. Trust me, you can’t trust anyone without doing a proper investigation.
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