During this time of financial turmoil and investor uncertainty, National Futures Association (NFA) reminds investors to be especially wary of investment offers that come from individuals who claim an affinity with a specific ethnic community, religious organization or social club. Just because someone belongs to your church or speaks your native language does not guarantee that the investment opportunity they are offering is legitimate.
"Recently, NFA has seen a rise in affinity fraud, especially within immigrant communities," says Karen Wuertz, NFA's senior vice-president of strategic planning and communications. "These communities are particularly vulnerable to con artists who speak their native language and know their social customs."
In many cases, affinity fraud is conducted as a classic Ponzi scheme. The fraudster pays out high dividends to early investors using funds received from customers who sign up later in the process. Flush with success, these early investors then promote the investment offer to their friends and family, allowing the con artist to continue his scheme right up until the moment he skips town.
"One of the biggest problems with affinity fraud is the reluctance of the victims to seek help or even admit it to a friend," says Wuertz. "A lot of damage is already done before the regulators and law enforcement agencies become aware of the problem."
As with any investment offer, there are steps investors should take to avoid becoming a victim of affinity fraud.
NFA encourages all investors to share this information with family, friends and neighbors. Remember: Don't make any investment decisions without a thorough examination of the investment offer and the person making the offer, no matter how well you think you know them.
NFA is a self-regulatory organization subject to oversight by the CFTC. NFA's primary mission is to protect investors and maintain market integrity.
NFA Members can file many of their required documents electronically.