SEC Charges Two Maryland Companies With Affinity Fraud Ponzi Scheme

The Securities and Exchange Commission (“SEC”) recently announced securities fraud charges against “two Maryland companies and their principals for a scheme that allegedly defrauded approximately 1,200 investors, many of them African immigrants, of more than $27 million.”  The charges allege that the three principals “directly and through their companies 1st Million LLC and The Smart Partners LLC, falsely told investors that their funds would be used by a team of skilled and licensed traders for foreign exchange and cryptocurrency trading, promising risk-free returns of between 6% and 42%.”  In reality, however, “the defendants diverted investor funds for personal use and to make Ponzi payments to prior investors.”  This scheme was particularly heinous because it “targeted vulnerable African immigrants and exploited their common ancestry and religious affiliations.”  As such, it was a textbook affinity fraud that prayed on vulnerable members of one ethnic community (of which the fraudsters claimed to belong) and then enlisted “respected leaders from the group to spread the word about the scheme, convincing them it is legitimate and worthwhile.”