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Affinity Fraud
One thing that has really caught my attention in the last week has been the Bernard Madoff Ponzi scheme. According to the government, Madoff may have lost $50 billion of investors' money in a scam that seems to have gone on for quite a number of years. It also appears that he was down to his last $200-$300 million when he told associates (identified as his sons) and he wanted to distribute that money and then turn himself in to the feds. His sons dropped a dime and called the feds for him.
Now, there's already been a lot of postmortem sniping about responsibility and regulation and so on, but the thing I noted about this scam is that quite a few Jewish charities were impacted, as well as some well-known (and not so well known) Jews here in the USA. Madoff appears to have been running an "Affinity Fraud," where his targets were members of groups that he was a part of.
I will confess this whole Madoff thing has really caught my imagination. I work for a financial institution and we're pretty heavily regulated (sometimes in the stupidest ways) but this Madoff fellow seems to have moved around like he was charmed for a very long time. And maybe that's the secret, Madoff is apparently a charming guy.
Any group where there's a lot of trust can be a target of affinity fraud. When I lived in Utah in the 90s, there were a number of fraud causes involving people who had invested with guys who promised fantastic returns, etc. etc. The one thing they had in common was that they were all members of the Mormon church. (In a weird twist, at one point a bankruptcy trustee sued the Mormon church to give back about $10 million that a particular group of scamsters had paid in tithing over the life of the scam. The trustee got his money after some legal finagling.) Utah was the scam capital of the universe for some time, but I believe, given the scale of this fraud, the capital has moved to the East Coast.
Have any of you been taken in by an affinity fraud? What if you found out that someone you went to church with, someone you'd invested money with, was scamming you? How would you feel? I think I'd feel betrayed, but I kind of feel that way every time I open up my 401K statement and see how much money I've lost. And that's my employer. And I still have to go to work.
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