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 the Securities and Exchange Commission (SEC) sued seventeen people alleged to be involved with a 300 million dollar cryptocurrency and foreign exchange investment Ponzi scheme targeting the Latino community. Mauricio Chavez and Giorgio Benvenuto were the main principals involved in CryptoFX a company that guaranteed its investors risk free investments in cryptocurrencies and other instruments that were guaranteed to provide returns of between 15% and 100%. Unfortunately, the only thing that was guaranteed was that their investors would lose their money as the funds were, according to the SEC, merely a Ponzi scheme where funds from later investors were used to pay off earlier investors to make the scheme appear legitimate while enriching Chavez, Benvenuto and the others involved in the scam. The SEC obtained an emergency court order shutting down CryptoFX while the case proceeds.
TIPS
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.
As for Cryptocurrency investing, it is 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. Cryptocurrency scams quite often involve complicated language and investment terms that are purposefully unclear in an effort to confuse potential investors from understanding the real facts. 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.
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