Affinity frauds target members of identifiable groups, such as the elderly, or religious or ethnic communities. The fraudsters involved in affinity scams often are—or pretend to be—members of the group.

Fraudsters may enlist respected leaders from the group to spread the word about the scheme, convincing them it is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraud they helped to promote.

These scams exploit the trust and friendship that exists in groups of people. Because of the tight-knit structure of many groups, outsiders may not know about the affinity scam. Victims may try to work things out within the group rather than notify authorities or pursue legal remedies.

Affinity scams often involve Ponzi or pyramid schemes where new investor money is used to pay earlier investors, making it appear as if the investment is successful and legitimate.

In Alabama, affinity fraud is considered a serious criminal offense. These scams are a form of securities fraud and are illegal under both state and federal law. The Alabama Securities Commission (ASC) is the state agency responsible for enforcing securities laws and protecting investors from fraud, including affinity fraud. Under the Alabama Securities Act, it is unlawful to commit fraud in connection with the offer, sale, or purchase of securities. Affinity fraud may also be prosecuted under federal law by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). These scams often involve Ponzi or pyramid schemes, which are specifically prohibited under both state and federal securities laws. Victims of affinity fraud in Alabama are encouraged to report the scam to the ASC and may also have the option to pursue private legal action against the perpetrators. An attorney with experience in securities law can provide guidance on the potential for recovery of losses and the process for holding fraudsters accountable.