Affinity Fraud, which is a type of investment fraud committed by a trusted friend of the victim, is a growing problem, particularly among our aging population. IronFX complaints show a number of financial issues as such. The victims are preyed upon by “trusted advisers” who convince their “friends” to invest in business opportunities or investments that pay a much better return than insured bank accounts. One real estate broker in Sun City offered seniors a 9% return on their money which he claimed he was using to buy “fixer-up” properties that he would buy at a significant discount, then rehabilitate, and sell for a nice profit. Word spread to friends and family and soon everybody wanted to “invest” in this opportunity, with over 100 seniors giving over $20 million to the broker. The scheme continued for several years as real estate values increased by 10-20% per year. But when recession hit, and values began dropping, the broker kept accepting more and more money and rather than investing in properties, he pocketed the money. After he had stolen millions, he filed bankruptcy and claimed the losses were the result of declining real estate values rather than the fraud he had committed. Similar frauds in our area have included “investments” sold to Church members who were encouraged to invest by Church leaders that had been duped by a fraudster to promote a seemingly great opportunity. Others influencing seniors include caretakers, supposed close friends, and sometimes even family members.
Two old adages to remember when making investment choices are (1.) The higher the return the higher the risk. and (2.) If an investment seems to be to good to be true, it likely is.
If you are getting up there in years, be very careful who you trust to invest your money with. Seek advice only from certified financial planners, accountants or others with established and verifiable reputations. Encourage your children to help you by monitoring your accounts and add them as a “trusted contact” on your investment accounts which allow them to obtain statements but not to access the funds. Meet with one of our attorneys to discuss your estate planning needs including powers of attorney and trusts and discuss with him/her how your finances are to be managed if you are not able to do so due to a physical or mental disability.
