Affinity fraud is not a singular specific type of fraud but is rather defined as any and all frauds targeted towards members of an identifiable group of individuals such as those with a common religion, ethnic heritage, background, or interests. The perpetrators of affinity fraud may pretend or may be members of the targeted group. They exploit the groups' inherent common trust to recruit victims for a fraud.
The Internet can serve as an efficient tool for investors, but it is also an excellent tool for defrauders. The Internet allows individuals or companies to reach tens of thousands of people by building a web site, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending mass e-mails. Because defrauders can easily make their information look real and credible, investors may have difficulty telling the difference between fact and fiction.
Some companies pay people to write online newsletters recommending their stocks, which are referred to as investment newsletters. Federal securities laws require the newsletters to disclose who paid for their product, the amount, and the type of payment.
"Pump and Dump" is a type of stock fraud involving the use of false or misleading statements to increase stock prices and then sell the inflated stocks to the public.
Named after Charles Ponzi, who infamously bilked investors out of millions of dollars in the 1920s, a Ponzi scheme is an investment scam that involves the payment of abnormally high "returns" to investors that are actually paid from money contributed by newer investors.
Prime bank fraud is a type of investment scheme that promises extremely high yields over a short period of time. Individuals claim that they have access to secret financial products which they can buy at a discount and sell at a premium. In reality, these financial products are fictitious. Individuals attempt to make these products seem legitimate by associating them with top world banks or secret government banking systems for the elite.
In a promissory note scam, the individuals perpetrating the scam often stay behind the scenes. They persuade others to sell promissory notes by promising them large commissions. The individuals who sell the promissory notes to investors often rely on the information they have been given, and they may not know that the information is false or misleading. The individuals perpetrating the scam use a portion of the money they collect from investors to pay the sellers their commissions.
A pyramid scheme is an unsustainable, illegal business model where investment returns are typically from the principal of investments or membership fees instead of from the underlying investment gains. It is often marketed as a foolproof way to turn a small amount of money into big returns.
Systematic Investment Plans (SIP) are regulated as Periodic Investment Plans under the federal securities laws. The primary objective of a SIP is to enable investors to clearly define an investment goal and then to help them reach it. While the majority of these plans are sold to military personnel, they are also sold to civilians.
Invidious discrimination is a legal term used to describe the act of treating a class of persons unequally in a manner that is malicious, hostile, or damaging. It refers to discrimination that is motivated by animus or ill will towards a particular group, rather than based on a legitimate, non-discriminatory reason.
