RECENT AFFINITY FRAUD SCHEMES

Affinity frauds can target any group of people who take pride in their shared characteristics, whether they are religious, ethnic, or professional. Senior citizens also are not immune from such schemes. The SEC has investigated and taken quick action against affinity frauds targeting a wide spectrum of groups. Some of our cases include the following:

Ponzi Scheme Solicited Members Congregations

The SEC complaint alleges that the defendants operated a Ponzi scheme and used investor funds to pay lavish personal expenses. The defendants raised over $16 million from more than 190 investors nationwide. Many of the victims were elderly members of Jehovah’s Witnesses congregations and were promised returns of up to 75 percent.

Fraudulent Investment Scheme Directed At Retirees

SEC charged various real estate investment companies and their principals with defrauding senior citizens and retirees out of $15 million by conducting transactions in which they issued promissory notes in real estate investments they owned and operated. To make the sales, the defendants made gross misrepresentations about the financial conditions of their investment companies.

Ponzi Scheme Targeted African-Americans And Christians

Defendants perpetrated an affinity fraud, raising at least $16.5 million from mostly African-Americans and Christians by falsely representing they would receive returns through investments in, among other things, real estate, small businesses, and “markets of the world.”

California Investment Adviser Bilked Korean Investors

Investment adviser raised more than $36 million by inducing members of the Korean-American community to invest funds with promises of large returns. Investors funds were not invested in accounts of a New York brokerage firm as represented; rather defendants put funds in bank accounts and fabricated monthly account statements. The adviser has pleaded guilty to related criminal charges.

Armenian-American Community Loses More Than $19 Million

This affinity fraud targeted Armenian-Americans with little investment experience, for some of whom English was a second language. The architect of this fraud was later indicted.

Criminal Charges Against South Florida Man For $51.9 Million Fraud

African-American victims of this investment scheme were guaranteed that their investments would generate a 30% risk-free and tax-free annual return.

“Church Funding Project” Costs Faithful Investors Over $3 Million

This nationwide scheme primarily targeted African-American churches and raised at least $3 million from over 1000 investing churches located throughout the United States. Believing they would receive large sums of money from the investments, many of the church victims committed to building projects, acquired new debt, spent building funds, and contracted with builders.

Baptist Investors Lose Over $3.5 Million

The victims of this fraud were mainly African-American Baptists, many of whom were elderly and disabled, as well as a number of Baptist churches and religious organizations located in a number of states. The promoter (Randolph, who was a minister himself and who is currently in jail) promised returns ranging between 7 and 30%, but in reality was operating a Ponzi scheme. In addition to a jail sentence, Randolph was ordered to pay $1 million in the SEC’s civil action.

More Than 1,000 Latin-American Investors Lose Over $400 Million

The victims sought low risk investments. Instead, the two promoters (who received prison terms of seven and 12 years respectively) misappropriated their funds and lied about how much money was in their accounts.

125 Members Of Various Christian Churches Lose $7.4 Million

The fraudsters allegedly sold members non-existent “prime bank” trading programs by using a sales pitch heavily laden with Biblical references and by enlisting members of the church communities to unwittingly spread the word about the bogus investment.

$2.5 Million Stolen From 100 Texas Senior Citizens

The fraudsters obtained information about the assets and financial condition of the elderly victims who were encouraged to liquidate their safe retirement savings and to invest in securities with higher returns. In reality, the fraudsters never invested the money and stole the funds.

If you have lost money in an affinity fraud scheme or have information about one of these scams, you should contact:

The SEC Complaint Center

Your state’s securities administrator. You can find links and addresses for your state regulator by visiting the North American Securities Administrators Association’s website. That organization also has investor tips for avoiding affinity fraud.

You also can check the SEC’s Investor Claims Funds webpage for information concerning the appointment of a receiver or claims administrator in any SEC enforcement action.