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 Michigan, affinity fraud is considered a type of investment fraud and is illegal under both state and federal law. The Michigan Uniform Securities Act (MUSA) prohibits fraudulent practices in connection with the offer, sale, or purchase of securities. This includes making false statements or omitting material facts, as well as employing any device, scheme, or artifice to defraud. Affinity fraud, which leverages the trust within groups such as religious or ethnic communities, often involves Ponzi or pyramid schemes, which are specifically outlawed under the Act. Victims of affinity fraud in Michigan can report the scam to the Michigan Department of Licensing and Regulatory Affairs (LARA), which oversees the enforcement of securities laws in the state. Additionally, federal agencies like the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) also address affinity fraud under various federal securities and anti-fraud laws. Victims are encouraged to report such scams to these agencies and may also seek civil remedies through private legal action. It is important for individuals to conduct due diligence before investing and to be wary of investment opportunities that seem too good to be true, even if they are presented by seemingly trustworthy individuals within their own communities.