The FBI recently listed securities fraud as the major white collar crime in Montana (“FBI talks about crime in Montana,” KPAX News, April 8, 2011). Affinity fraud, in particular, seems to be especially prevalent.
James McTighe, FBI Special Agent in Charge of the Salt Lake City, Utah Division, explained*: “Affinity fraud deals with a relationship that exists between the individual, the fraudster, and the victim.” He believes it is this “relation of trust” that makes investors so easily manipulated by affinity fraudsters.
The SEC agrees: “These [affinity fraud] scams exploit the trust and friendship that exist in groups of people who have something in common.”
Affinity fraudsters often are (or pose as) members of a particular group, such as a religious group, a particular age group, or an ethnic group. According to the SEC, the scam artists often con “respected community or religious leaders” first, because the leaders’ approval will help the con artist appear legitimate to the group. The leaders then “become unwitting victims of the fraudster’s ruse,” and help solicit and recruit other members of the group into the investment scheme.
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Protecting themselves against fraud should be a top priority for investors, said SAC McTighe. “Do you[r] due diligence, do your homework, research it, make sure that you try to find out as much as possible about the individual and don’t just assume because you have a relationships with them that your investment is going to be safe.”
For additional tips on how to protect yourself from affinity fraud and other types of securities fraud, click here.
*Quotes from SAC McTighe were found in Reporter Irina Cates’ KPAX News article.
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