SEC Issues Investor Bulletin Regarding Affinity Fraud
The SEC Office of Investor Education and Advocacy issued an investor bulletin to educate investors about affinity fraud, a type of investment scam that targets members of identifiable groups.
The alert explains that affinity fraud often takes the form of a Ponzi or pyramid scheme, in which 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 cases of affinity fraud, fraudsters frequently pretend to be members of the group they are attempting to defraud.
The bulletin offers tips to help investors avoid fraud, which include the following:
- always research an investment offer and the individual making the offer;
- an investor should never make an investment based on the recommendation of a member of an organization or group to which the investor belongs; and
- be skeptical of any investment opportunity that cannot be put into writing.
The SEC recommends that investors contact the SEC via its complaint center if an affinity fraud is suspected.