Investment fraud is generally when an individual or company tricks an investor into giving them money using deception. Investment fraud is one of the most common and typical examples of white collar crime. Investment fraud can occur when an investment does not exist or is factually different than it has been described either in writing or verbally.
Recently, “Ponzi” schemes have received an increased amount of attention in the media as well as from prosecutors. A Ponzi scheme involves recruiting investors with promises of financial returns that the underlying investment can not produce or justify. Either the investment does not exist or it is incapable of providing the promised financial returns. Instead, the original investors are paid off from money invested by later investors. Eventually the “Ponzi” scheme falls apart and the later investors receive nothing or lose most of their investment.
“Affinity fraud” frequently occurs along with Ponzi schemes. Affinity fraud affects members of identifiable groups, commonly religious or ethnic or language minorities, elderly people, or even certain professional groups. The individuals that are accused of affinity fraud are frequently members of the groups themselves. It is not unusual that certain respected members of the group, clergy or elders, for example, are recruited to give the scheme legitimacy.
Typically, these scams take advantage of the trust that occurs whenever people have something in common. Victims sometimes refuse to report the activities or pursue their legal remedies, deciding to keep the situation within the group. This occurs most often when respected members of the community are in charge or have been recruited to give the scam the appearance of legitimacy.