Today, the Better Business Bureau of Mainland BC (BBB) announced the Top Ten Scams to watch out for this year. Topping the list of financial scams is affinity fraud, a type of scam that often ends up being a Ponzi scheme.

In an affinity fraud, investors know each other because they are friends, or they all belong to an organization or group the scam artist exploited. Scam artists “sell” Ponzi schemes into this type of group because they can use the tight network to spread word about the scam, and they can keep it a secret from those outside the group.

As part of our Be Fraud Aware advertising campaign, we present a number of YouTube videos that feature David, an unscrupulous fraudster. In “Ponzi 101”, David explains how this type of investment scam works from his perspective.

In reality, people find out about Ponzi schemes when the scam artist can no longer find new investor funds to pay previous investors – “jellybeans” in David’s explanation. When the money supply dries up, payments stop, and the people involved find out the investment was a scam.

The results are often devastating. Investors lose money, friendships, their trust in others and, sometimes, their health.

A few signs of affinity fraud are:

  • A person close to you or in your social circle is selling an investment that offers higher than market returns, with little or no risk.
  • The person selling the investment discourages you from seeking independent advice.
  • An investment is exclusive and available to only those in your community or organization.

There is a section on our website that discusses affinity fraud. In it, we list more warning signs, groups that are at risk, and information on what to do if you suspect someone is selling fraudulent investments to your friends or family.

You can find out more about this year’s Top Ten Scams on the BBB’s website. Plus, the BBB has nominated a Scam of the Year to round it out to ten.

We work with the BBB throughout the year, making presentations across the province. Watch for announcements of these events on our social media channels and InvestRight.

Also, if you suspect an investment is a scam, contact the BCSC immediately. You can report scams to our Inquires group by calling 1-800-373-6393, 604-899-6854, or e-mail [email protected].

Suggested Reading

In Your Community - September 2013

A balancing act - investor protection vs capital raising

PanaMoney: On the top 10 HYIP list

More Resources

CSA releases sixth annual Enforcement Report

In advance of Fraud Prevention Month, the Canadian Securities Administrators (CSA) today released its sixth annual Enforcement Report. The 2013 report highlights the overall enforcement work done by CSA members against those who breach Canadian securities laws. In 2013, CSA members concluded 133 cases against 216 individuals and 166 companies. The cases concluded resulted in: […]

Take the Fraud Challenge on our updated mobile app

This week, we are rolling out an updated version of our Be Fraud Aware mobile application that you will see advertised on and around public transit across the Lower Mainland. The updated app is now available for Android devices, and it includes a new tool, the Fraud Challenge. The Fraud Challenge is a five-question quiz […]