In an affinity-type fraud, scam artists take advantage of the common bonds people develop through religious, professional or ethnic affiliations to gain a victim's trust. Typically, fraudsters target a respected member of an affinity group and, through that person, attempt to meet and gain the trust of other group members to convince them to invest in their schemes.
Affinity scams usually involve a pyramid (or ponzi) scheme where part of the money from new investors is used to make payments to earlier investors. The flow of money gives the illusion of a high return, and builds credibility for the scheme, helping to lure more investors and convince the earlier investors to leave their money in (or even invest more). Inevitably, the supply of new investors dwindles, the scheme collapses and the investors lose most, if not all, of their money.
Buyer beware…
Always make sure you investigate an investment opportunity and ensure that the person selling it is registered to sell investments. Requests for secrecy are an immediate red flag that something might be wrong. Don't be drawn in by promises of big returns - your return might be coming from someone else's investment.
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