In light of its recent judgment against a man who allegedly operated a fake charity business to swindle hospice patients, the SEC’s Office of Investor Education and Advocacy is encouraging investors to be wary of fraudsters claiming to help charitable causes.

“Supporting a good cause while investing your money may sound like a win-win situation. But be aware that fraudsters may try to exploit your desire to help others by using charitable causes as a way to draw victims into investment scams,” the SEC said in an investor alert.

On Tuesday, the SEC charged Jay Daniel Seinfeld, his purported charity and Sara Beth Postma (a social worker he employed) with gaining access to terminally ill investors and defrauding them.

Seinfeld and Postma persuaded more than a dozen such patients to provide their personal information and sign transaction documents as purchasers of corporate bonds that would pay out upon their deaths while simultaneously relinquishing most of the bonds' anticipated proceeds, the agency’s complaint said.

The SEC claims the pair misrepresented that if the hospice patients purchased the securities while giving up the large majority of the anticipated investment returns, their disclaimed money would be used to help other hospice patients and their families. The SEC also alleged that Postma visited patient-purchasers in hospice and allegedly offered them $200 as charitable aid in the form of a check, gift card or cash and reserved $2,000 to $2,500 in securities proceeds for them upon their death. Instead of going to any claimed charitable objectives, the disclaimed proceeds from the securities transactions were divided among the defendants and wealthy investors.

“When making an investment decision, do not let your guard down just because the investment claims to advance a charitable cause. Use the same level of scrutiny you would to evaluate any investment opportunity,” the SEC cautions.

Additionally, the SEC offers the following advice for protecting against thieves who target “charitable” investments:

• If you are considering participating in an investment offered by a charity that claims to be a tax-exempt or “501(c)(3)” organization, check out the organization’s tax status on the Tax Exempt Organization Search on the Internal Revenue Service’s website. If a so-called charitable organization is not listed, and has misrepresented that it is tax-exempt, do not invest in the organization.

• As with any investment opportunity, check the background of the person selling or offering the investment. Use the free and simple search tools on to verify that the person is currently registered or licensed, and to find out about the person’s background, including any disciplinary actions or customer complaints.

• Be cautious if someone offers to give you money or a valuable gift in exchange for investing your money. Fraudsters sometimes use reciprocity (offering to do a small favor for you in return for a big favor) as a tactic to lure investors into investment scams.

• Be aware that fraudsters may ask you to agree up front that your investment returns will be applied to a charitable purpose, but instead keep the money for themselves. You can always decide to donate your investment returns after you receive them.