"Since I knew them from my local classic car meetup I thought I could trust them."
Affinity fraud is an investment scam in which fraudsters take advantage of the trust and friendships within groups, religious organizations, and even social clubs to pitch fake opportunities to make money.
Learn how you can easily recognize affinity fraud in your community and take the right steps to check the background of anyone offering you a money-making opportunity, whether it comes from a friend, neighbour or family member.
How to recognize affinity fraud
While devious and sometimes hard to spot or believe, affinity fraud has red flags you can recognize. It’s wise to check into any person or business offering an “opportunity.” Beware if you notice any of the following:
- “Exclusive” and “time-sensitive” opportunities
- Anyone using their personal connections when offering a money-making opportunity
- Referrals from group members
- Low-risk, high-reward promises
- Different names for money-making opportunities including loans, promissory notes, shares, assets, and units
How you can be approached with affinity fraud
The situations and scenarios in which you can be approached with affinity fraud can come both in-person and online. Below are just some examples of what affinity fraud can look like. No matter who tells you about an investment opportunity, always do your own research, including understanding where the opportunity is really coming from.
An unsolicited investment offer from a new friend at your community group with name dropping of other people in the group who have invested.
“Hey, I have a great investment opportunity if you’re interested. It’s seen massive growth this year, and if you’re willing to invest, I could get you in. Tom and Kate invested last week.”
An investment offer suggested by a friend or family member that they have invested in and are seeing returns. Friends and family may be unknowingly soliciting the scam based on these earlier returns, and such returns could be coming from other defrauded investors.
“Your father invested in this fantastic new tech start-up through his old co-worker Greg, and we are already seeing some great returns. Do you want me to connect you with Greg so you can invest as well?”
An investment promotion or discussion through social media platforms like Facebook and TikTok and online forums like Reddit with guarantees of high returns.
“This new investment suggested by Rexor _139 in our investor’s group on Reddit is doing really well. He provided links to the company’s news releases on their website and says it’s going to the moon and will definitely double our money within a month.”
Before investing in any opportunity offered to you by friends, family, or online individuals, remember to research and find answers to the following:
1) Where does the investment opportunity originate from?
2) Is the individual or firm registered to be selling investments in Alberta?
3) Is the company in the investment opportunity legitimate? Do they have credible information about their financials outside of their website? Has the company changed its business offering rapidly or has unclear products or services?
4) Do you see any of the red flags of investment fraud?
How to check anyone offering a money-making opportunity
When it comes to your money, the best decisions are informed ones. If anyone is offering you a money-making opportunity there are simple ways to help protect yourself from fraud.
- Check if they are registered to sell securities or investments
- Check if they’ve had any disciplinary action (including an interim cease trade order) taken against them in the past through ASC Search or the CSA Disciplined list
- Use our Affinity fraud prevention checklist to review any money-making opportunity
- Sign up for news releases to receive updates on fraudulent activity.
- Consult a knowledgeable professional such as a lawyer, accountant or financial advisor who is not involved in the deal
- Contact the Alberta Securities Commission Public Inquiries office at email@example.com or call toll free 1-877-355-4488 and we can check for you