An affinity scam, according to the Securities and Exchange Commission's Office of Investor Education and Advocacy, is one in which a swindler preys upon members of identifiable groups, often religious or ethnic communities. The fraudsters might belong to the group or just pretend to, and they often recruit respected community leaders to help them tell people about the offerings.
The commission is highlighting seven cases of affinity fraud to educate and warn investors about this kind of scam.
SEC Charges Ponzi Scheme Promoter Targeting Primarily African-American Churchgoers
On April 12, 2012, the commission charged a self-described "social capitalist" with running a Ponzi scheme that swindled $11 million from socially conscious investors in church congregations. The SEC alleges that Ephren W. Taylor II, 29, of New York City, lured investors into two investment programs. He actually used the money to publish and promote his books; to hire consultants and refine his public image; and to fund his wife's singing career. (http://www.fa-mag.com/fa-news/10598-sec-charges-new-york-advisor-of-bilking-church-goers-out-of-11-million-.html).
SEC Charges Company For Fraud Targeting Christian Investors
On April 30, 2012, the commission settled fraud charges against the owners of a Dallas-area voice over Internet Protocol (VoIP) company for running a fraudulent securities offering aimed at Christian investors, many of whom were affiliated with a Dallas-based private school. The SEC alleges that Terry E. Wiese and Scott A. Wiese promised extreme returns -- as much as 1,000 percent in a year -- to entice investment in their company, Usee, Inc. (http://www.sec.gov/litigation/litreleases/2012/lr22348.htm).
SEC Shuts Down Ponzi Scheme Targeting Persian-Jewish Community In Los Angeles
The SEC on April 13, 2012 charged a California financial advisor with stealing more than $7.5 million from 11 investors in a Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles. The SEC alleges that Shervin Neman (formerly known as Shervin Davatgarzadeh), 30, of the Century City section of Los Angeles, in the past two years raised more than $7.5 million from investors who bought into his hedge fund, Neman Financial L.P. Neman claimed that the fund invested in foreclosed residential properties that would be quickly flipped for profit. But the SEC claims that essentially all the money Neman raised was used to either pay existing investors or fund his lavish lifestyle. (http://www.fa-mag.com/fa-news/10613-california-advisor-charged-with-stealing-over-75-million-in-ponzi-scheme.html.)
SEC Charges South Florida Man In Investment Fraud Scheme
The SEC on April 6, 2011 charged a South Florida investment manager with defrauding investors by making false claims about his investment track record and providing bogus account statements that reflected fictitious profits. The SEC alleges that since 2005, George Elia and International Consultants & Investment Group Ltd. Corp., had pulled in at least $11 million from investors by falsely claiming annual returns as high as 26 percent and that Elia transferred more than $2.5 million of investor funds to two entities he controlled, Elia Realty, Inc. and 212 Entertainment Club Inc. (http://www.sec.gov/litigation/complaints/2012/comp-pr2012-56.pdf).
SEC Halts Affinity Fraud Aimed At Hispanic Community
The SEC on May 12, 2012 charged a California registered financial investor with making materially false and misleading statements about the offer and sale of securities of Maradon, an entity that Armando Ruiz, 46, of Rancho Santa Fe, formed in May 2007 and controlled thereafter. Ruiz told investors that his goal was to develop Maradon into a financial firm serving the Hispanic community. From April 2008 through May 2009, Ruiz raised approximately $705,000 from eight equity investors and an additional $112,500 from a ninth investor who made a loan to Maradon that was convertible into Maradon equity, for a total of $817,500. (http://www.sec.gov/litigation/admin/2011/33-9209.pdf.)
SEC Charges Real Estate Developer In Miami Affinity Fraud
U.S. District Judge Kathleen Williams of the Southern District of Florida on April 4, 2012 sentenced Gaston E. Cantens, 73, of Miami, to five years' imprisonment followed by three years of supervised release for conspiring to commit mail and wire fraud in conducting a $135 million Ponzi scheme targeting Cuban-American investors, primarily from South Florida (http://www.sec.gov/litigation/litreleases/2012/lr22318.htm).
SEC Halts Online Affinity Fraud
The SEC on October 21, 2011 charged Amit V. Patel, 49, of Shoreview, Minn., with operating an affinity fraud in which he raised at least $2.4 million from at least five individuals in 2008 and 2009. He offered and sold promissory notes and convinced investors to grant him trading authority over money contained in online brokerage accounts. While doing so, Patel misrepresented his intended use of the money, the risks of his trading and the source of the money used to pay the guaranteed fixed returns, and he falsely guaranteed repayment of investors' principal. (For more information go to: http://www.sec.gov/litigation/admin/2011/ia-3303.pdf.)