According the SEC
“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. It could be an ethnic group or an 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 grup they think they can convince to trust them iwth the group member’s hard-earned savings.”
The SEC indicates, affinity fraud usually involves:
- a phony investment
- promote false information such as historical returns, track records of investors, risk of loss and/ or idenity of the investment promoter.
- many affinity frauds are pyramid schemes.
How do you protect yourself from affinity fraud:
- Even if you know the person make sure you research their background no matter how trustworthy they seem.
- Research the investment on your own.
- Be aware the person explaining the investment to you may have been fooled into believing the investment is legitimate when it is not.
- Never make an investment based solely on a recommendation of a member of the organization.
- Do not buy investments that promise huge profits.
- Be very wary of any investment that claims there is no risk of loss. No investment is risk free.
- Become very suspicious if you are told to keep it secret.
Don’t let anyone rush you into buying before you have had time to do your research. Just because someone else claims to have made money does not mean you to will make money. Be very leery of any sales pitch claiming the investment is ”once in a lifetime” or based on “inside information”.