Note: Below you’ll find a fact pattern, using entirely fictional people, that illustrates a type of securities fraud.

Aiesha lives in Brooklyn, NY, and is active in her church. Last June, she was approached by a fellow church member about an investment opportunity that he said was too good to miss.

The man said he was a successful money manager and represented GTF Enterprises, Inc., a firm comprised of “extremely knowledgeable strategists with years of experience working with top financial firms on Wall Street.” Aiesha wasn’t sure what a strategist did but she figured they had to be smart and important.

Aiesha also was told that:

• GTF practices “sound and careful” investing in options, futures, commodities, and other investment products.
• Investments are risk-free— GTF assumes all of the trading risks.
• GTF guarantees investors will earn between 4% and 20% per quarter.

She initially invests $5,000. Each quarter, she receives account statements showing high returns. Based on the account statements, and pressure from other church members, she withdraws all the money from her savings account and invests it with GTF.

But, if it sounds too good to be true… it usually is. Soon, she learns that she has lost her entire life savings. She is a victim of affinity fraud, a type of scam that preys upon members of groups such as religious, ethnic communities, the elderly, or professional groups.

Lessons Learned

• Don’t be taken in by someone just because they are a member of your group or seem to have the group’s support.
• Check out the investment professional. Had Aiesha done this, she would have learned that the man who approached her was not a money manager and was not registered with the SEC, New York State’s securities regulator, or FINRA, and that GTF “strategists” did not have years of Wall Street experience.
• Be extremely leery of any investment that is said to have no risks; no investment is risk-free.
• Don’t fall for investments that promise spectacular profits or “guaranteed” returns.

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