SEC Charges Church Leaders in Investment Fraud Scheme That Targeted Church Members

According to the Securities and Exchange Commission (SEC), the SEC has charged seven church leaders, in Queens, New York, for orchestrating an investment fraud scheme that took advantage of elderly church members.  It is alleged that the elderly investors were defrauded of more than $12 million.  The SEC says that the seven church leaders would make false promises of returns as high as 75% in an effort to get the investors to invest in two hedge funds, the Logos Fund and the Donum Fund.  Once the investors invested, the money would be misappropriated rather than invested.  The church leaders would allegedly use the investor’s funds to sustain lavish lifestyles, which included purchasing jewelry, clothing, luxury cars, and funding expensive foreign travel.

The SEC’s complaint states that the fraudsters took advantage of more than 80 investors, claiming incredible returns.  The SEC says that the fraudsters “misrepresented the performance of the Logos Fund, the amount of assets under management,  the identity and skill of the portfolio managers, and the level of supervision of the portfolio managers. Further, the SEC states that the defendants also “misrepresented the registration status of the Donum Fund by falsely claiming to investors that the fund was registered with the SEC.”  In addition, it is alleged that instead of investing the money as promised to the investors the fraudsters immediately misappropriated the investor’s money as soon as they invested with the funds. Along with lavish purchases, the fraudsters used the money to pay for unauthorized operating expenses of Jadis Capital and Jadis Investments.

Affinity fraud occurs when a fraudster exploits investors in close knit communities like church groups.  Unfortunately, this type of fraud is common. The SEC has had to bring similar affinity fraud enforcement actions against fraudsters who have exploited members of a deaf community, various minority groups, and other religious groups similar to this matter. Fraudsters prey on individuals within such groups by exploiting the trust relationship that they share with the individuals within the same small group.

It seems outrageous that a person would take advantage of someone who they go to church with or someone who they share membership with in a community group.  But, we must remember that greed can penetrate any group.  Although it may be easy to trust a church member or a parent of a child in your child’s boy scout troup, we must always be conscientious when investing.  Remember if the person who wants your business, to invest YOUR money, gets defensive when you ask questions about the investment, about their qualifications, or about the returns and does not want to provide an adequate prospectus or other necessary information to make your investment decisions, you may want to chose another person to trust with your investments.

If you believe you are a victim of affinity fraud or any other type of investment fraud, you may have a legal claim against an individual broker or brokerage firm.  The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. We invite you to visit our website www.dossfirm.com for further information.