Affinity Fraud Likely to Rise in Aftermath of Election

Before 2016’s presidential contest, many of us thought we understood the world and our place in it. We were part of various groups — neighborhoods, religious organizations, school groups, and work associations. Race, culture, age, and background gave us a sense of identity and operated as a shortcut for letting us know whom to trust.

Perhaps they still do.

Our trust in others, however, has been decidedly shaken post-election. Friendships have frayed as we turn to an increasingly smaller set of “those like us.” This natural search for persons, things, and ideas that provide a sense of connection leaves us vulnerable to financial fraud based on our affinity with a given group. With optimistic expectations for economic improvement and/or the need to support our organizations and values, we leave ourselves open to appeals for financial investments that could turn out to be scams.

Awareness is Key

Affinity — the formal name — for “those like us” describes the relationship formed by shared ties and common beliefs. Often these are long-held relationships, but, post-election, many new groups are seeking our membership and we don’t always know them well. Whether new or long-standing, membership makes it is easy for someone to gain our trust. Intentionally or misguidedly, they engage us in financial transactions which are ill-conceived, out-right deceptive, or a total scam. We are vulnerable to participation in financial fraud not just because we think we will make money, but also because we will be accepted by the group.

Often, the scammer presents the victim with an “investment” in a new company or other “opportunity.” The scammer may offer the victim a partnership, or describe a loan with a guaranteed return, a great real estate deal, or the opportunity to support the values and goals of the organization through the investment. Putting the money one or two steps away from himself makes recovery of losses more difficult and easier to extend the length of the scam.

Skepticism is Healthy

Affinity fraud is one of the most dangerous kinds of fraud because it causes us to overlook our normal skepticism. We are hesitant to give money to a stranger, but not so much to people we know and trust. Many of the most effective affinity fraud schemes do not promise a get-rich-quick opportunity, instead promising repeated “investments” of more and more money.

When the scheme comes apart and the victim of affinity fraud realizes the situation, embarrassment and group dynamics cause the victim first to attempt to solve the problem within the group instead of going to the authorities. This virtually insures that the fraud will continue, and will make prosecution, as well as recovery of losses, much more difficult.

Here for You

Attorney Joseph H. Spiegel works closely with investors who have been defrauded or who have been sold unsuitable or deceptive investments. If you think you have been, or may be, the victim of financial fraud or abuse, it is imperative that you contact a competent and trusted securities law attorney right away. Call our office at 734-761-8475 for more information.