SEC Stops Alleged Affinity Fraud Targeting the Somali Community
The U.S. Securities and Exchange Commission (”SEC”) has halted an alleged Ponzi scheme that targeted the Somali community. According to the SEC’s complaint, Mohamud A. Ahmed (”Ahmed”) advertised “investment opportunities” at a check cashing business he operated in San Diego. Investors came to him through that store, through a seminar he held in the Seattle-Tacoma area, and through solicitations at a mosque in San Diego.
According to the SEC, Ahmed raised a total of $3 million by promising monthly returns of five percent and that investors could get their money back at any time. He made supposed distribution payments for a time, but eventually stopped sending the promised checks. Among the victims was a mosque that invested $200,000.
Notice two things about this case. First, notice that Ahmed targeted an identifiable group and used his supposed faith to convince people to invest. Affinity fraud is rampant. Whatever your faith, I promise you that if frowns upon fraud. When you encounter a supposed devout member of your faith, you are tempted to believe that the investment comes with a sort of “divine guarantee.” Nothing could be further from the truth. Judaism, Christianity, and Islam all warn the faithful against the tricks of the deceitful.
Finally, notice that Ahmed sent supposed distribution payments to early investors. The most insidious thing about a Ponzi scheme is that is leads investors to believe that they have seen it work “with their own eyes.” The checks come as promised, and the victims have no idea until the SEC exposes the fraud, that the money they received was their own principal or someone else’s.
The only way to protect yourself against such schemes is to get a pre-investment investigation by someone who is in the business of recognizing them. Do what banks do when they move cash: hire private protection.
