SEC Warns on Rise of Affinity Fraud

The Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy on Wednesday issued an Investor Alert to help educate investors about affinity fraud, a type of investment scam that the agency is seeing more of that preys upon members of identifiable groups, such as religious or ethnic communities or the elderly.As the SEC explains, 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,” the SEC says.
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