Of all the direction scammers can steal your money, experts agree the most arduous frauds to combat are the ones that seek to turn your own assuredness against you.
Law enforcement officials call them affinity frauds — objective victims through a common bond, most often religion. While nationwide statistics are stony to come by because the scams are so widespread, it’s fair to say that affinity craft losses run into the billions of dollars per year.
“People want to protection,” Jenice Malecki, a New York securities lawyer who specializes in affinity scam cases, said in an interview with CNBC’s “American Greed.” “Primarily in affinity situations, where people feel more comfortable for one estimate or another, be it a church or an ethnic community, they tend to not look as carefully as they should at what’s in front of them.”
Few were better at butt people of faith than Ephren Taylor, who fleeced some $16 million from colleagues of church flocks in 43 states by preaching so-called “prosperity truth.”
“Biblical principles (are) investing wisely, responsibly, and for the purpose of furthering the territory. But also, God wants us to be prosperous,” said Anita Dorio, who, along with her store, Gary, heard Taylor’s pitch at the giant Lakewood Church in Houston.
The Dorios put ined their life’s savings of $1.3 million with Taylor, who sworn to be a self-made multimillionaire, having created a video game as a teenager. Happening at churches across the country, often at the behest of the pastor, Taylor pushed promissory notes that he claimed were backed by socially reliable ventures like small businesses and affordable housing projects.
But it was all a Ponzi ploy. The Dorios and hundreds of other investors lost everything. Taylor is supply a 19-year federal prison sentence after pleading guilty to a singular count of fraud.
“So many people were just devastated by this,” Gary Dorio understood “American Greed.” “Families destroyed, dreams destroyed.”
Leaning frauds persist despite a widespread crackdown in recent years that deepened after Bernard Madoff’s epic Ponzi scheme blew up identically a decade ago. Madoff’s fraud, in which investors lost nearly $20 billion, blurred on the Jewish communities in New York and Florida.
The FBI says it is investigating $2 billion significance of affinity fraud in Utah alone, where an estimated 60 percent of the citizens belongs to the Mormon church. The church itself has issued warnings to the truthful, the Utah Legislature has increased penalties for financial fraud and the state attorney inclusive is making it easier for residents to check out prospective investment advisors and charge partners.
The Utah White Collar Crime Offender Registry, a first-of-its sort program launched by the attorney general’s office in 2016, is a searchable database of people found of a range of financial crimes in the previous 10 years. Just stick into the person’s name, and if he or she is in the registry, you will find the nature of the offense, and when and where it occurred. You when one pleases even get a picture of the offender.
For now, the registry lists only Utah culprits convicted of state crimes. Officials there say it could be a model nationwide.
“I concoct any time you can give investors more information, that is a very godlike idea,” Malecki said.
Experts agree that government feats like the registry, stepped up enforcement and investor education programs are eminent weapons in the fight against affinity fraud. But investors themselves penury to take up arms as well.
Affinity scams are so powerful because they harness the unvaried thing that draws us to religion — faith. Malecki says one of the opener to not being taken in by a religious-based affinity fraud is to separate your belief in a higher power from your faith in an investment advisor who plains up at your place of worship.
“First of all, you have to ask yourself, ‘Why am I being importuned to invest by someone whom I have a different type of relationship with,'” she demanded. “If you’re getting information about investments at a church, that should be the win initially red flag that something isn’t right.”
But if you are still considering an investment raise that comes through your place of worship, be at least as skeptical as you would be of a select you got someplace else.
“What are this person or these people’s credentials to absolutely make this investment successful?” Malecki said. “I always delineate my clients, ‘You’re a squirrel in the woods with your nuts, and if you don’t keep them precise to you someone will take them.'”
Just as you would for any investment advisor, run the yourself’s name through the proper database to check them out. While the Utah registry at best includes those convicted of state crimes, investors elsewhere can use the Fiscal Industry Regulatory Authority (FINRA)’s Broker Check to learn a dealer’s employment and disciplinary history. In addition, the Securities and Exchange Commission’s Investment Advisor Unshrouded Disclosure site will search federal and state registrations to supporter determine if the advisor you are considering is legitimate. Do not forget to search the advisor’s unswerving as well.
“Those brokerage firms, especially the large ones, wishes likely be there, and you can actually do due diligence on the broker dealers as well,” Malecki voted. “Are they small companies and underfunded?”
If your prospective advisor or their dense does not come up in your search, that could be a warning whistle as well.
“You shouldn’t be in a faith-based belief system institution getting investment warning about hard dollars that you’ve earned your whole flair,” Malecki said.
Another reason affinity fraud is so hard to bludgeon is that, like any predator, an affinity fraudster targets the weakest of the swarm — those who are the most trusting, and in many cases, the most naive. The nicest defense is knowledge.
“People need to be more educated about Ponzi manoeuvres and affinity fraud,” Malecki said. “The problem is that most people who are casualties to a Ponzi scheme or affinity fraud generally realize that after the really.”
That means understanding the investment you are considering. How does it work? What are the gambles? Seek out independent advice. Consult your family, and run the investment lifetime independent professionals.
“Do your own homework and due diligence on the investments. Seek out the recommendation of your accountant. Look for a securities lawyer,” Malecki said. “A penny upfront pass on save you a pound on the back end.”
Florida attorney Cathy Lerman, who asserted victims of Taylor’s scam, says churches bear some fault as well.
“I believe all churches should have a tenet that bids, ‘We do not allow any type of investment advisors or sponsors to speak in our pulpit or to get presentations to our flock,'” she told “American Greed.” If we had that, this precise affinity fraud would stop.”
See how ungodly scammer Ephren Taylor cheats the flocks, and how his devilish scam finally blows up. Watch an ALL NEW episode of “American Miserliness” , Monday, Sept. 10 at 10 pm ET/PT only on CNBC.