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 Tennessee, affinity fraud is considered a type of securities fraud and is illegal under both state and federal law. The Tennessee Securities Act of 1980, as well as federal securities laws, prohibit fraudulent activities related to the sale or purchase of securities. Affinity fraud typically involves the use of deception to induce members of specific groups to invest in fraudulent schemes, such as Ponzi or pyramid schemes. These scams exploit the trust within groups, and perpetrators may face severe penalties, including fines and imprisonment, if convicted. The Tennessee Department of Commerce & Insurance's Securities Division is responsible for enforcing securities laws and protecting investors from such scams. Victims of affinity fraud in Tennessee are encouraged to report the fraud to the Securities Division and may also have the right to pursue private legal action against the fraudsters to recover their losses. An attorney with experience in securities law can provide guidance on the legal options available to victims of affinity fraud.