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What Is Affinity Fraud?

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What Is Affinity Fraud?

We often hear stories about Ponzi schemes that target a particular group or community, such as a church congregation. When a con artist chooses to target a specific group in this manner, it’s called “affinity fraud.” There have been dozens of cases of affinity fraud related to Ponzi schemes just over the last year, which have affected investors all over the nation. Unfortunately, con artists are generally willing to manipulate any advantage they can find that might get you to hand over your cash—and sometimes that means taking your cash and moving on to milk your loved ones.

Who Is a Common Victim of Affinity Fraud?

Affinity fraud targets members of specific, identifiable groups. The most commonly targeted groups include religious, ethnic, racial, professional, and senior groups, but any group whose members share a common interest or background is at risk. Affinity fraudsters use their affiliation with or membership in these groups to gain the trust of the other group members.

Con artist Amjed Mahmood, for example, targeted 300 fellow members of the Des Plaines Muslim community in a $40 million Ponzi scheme uncovered last year, and Ahmed Alabadi, a dual citizen of Iraq and the United States, cheated approximately 3,000 Iraqis (living in the U.S. and overseas) out of more than $2 million in a separate investment scheme.

As is the case with most affinity fraud schemes, both Mahmood and Alabadi used their group memberships to gain their victims’ trust. However, affinity fraudsters do not have to be members of their target group. Instead, he or she can use his or her connection to an influential group member to gain access to the group. That’s what Anthony Ray, operator of Key Funding Group and a recidivist con artist, did. Ray managed to defraud more than a dozen members of the Pine Grove Baptist Church out of nearly $660,000 by getting the church’s pastor to trust him and introduce him to members of the congregation. The victims of Ray’s scheme so believed his claims that several of them refinanced their homes and/or took out additional loans to invest more.

Unfortunately, that level of trust—and degree of financial devastation—isn’t unusual for an affinity fraud scheme. In fact, many victims of affinity fraud suffer significant losses because they believe wholeheartedly in the con artist and whatever “investment” he or she is pitching. That’s why identifying affinity fraud and knowing how to avoid it is so important – by the time a particular affinity fraud scheme is uncovered, many of its victims have already lost everything

Why Is Affinity Fraud So Effective?

It works because it narrows the focus. The benefit of doing this is twofold for the con artist:

  • Investors feel more comfortable with the fraudster. If you have something in common with the person pitching an investment, you’re more likely to extend your trust. A skilled con artist who has your trust can use this to talk you into (and out of) all kinds of investments.
  • Investors tell their friends and families about the “deal.” When you hear about an investment deal from a friend or acquaintance, you’re more likely to take the investment seriously. If you hear about a great investment opportunity from 5 or 6 people at your church or school, then you really take notice and get interested—the con almost sells itself!
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