Know Better, Do Better, Avoid Charity Scams

I was talking to an older family member last week about some of the work I do in the community. “Charity, charity, charity,” she said. “It’s all one big scam.” How cynical, right?

This morning I read about a *yet another* scam charity.

The SEC today charged John H. Min of Tacoma, Washington, and his company Dime Financial Group LLC with collecting over $6 million in a fraudulent investment scheme that targeted churches, church members and senior citizens. Some investors thought their money would support Third World charitable causes. Guess what Min did with the money? Let’s just say he’s not shopping at Target.

Affinity Fraud, Again

This is yet another instance of affinity fraud wherein Min associated himself with a tight-knit religious and philanthropic community in the Pacific Northwest. He then created a non-profit entity which he used to collect funds, as well as create legitimacy to help him lure other people into investing with him.  According to the SEC, Min actually promised annual returns as high as 800%. Come on people.

“This case serves as an unfortunate reminder that investors need to be wary of possible fraud schemes even when the person offering the investment appears to be part of a humanitarian, religious or other community of trust,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office.

Min followed the affinity fraud formula:

• First told investors that he would use their money to trade in some area that he had ’special expertise’ (in his case, the foreign currency exchange (Forex) market).
• Instead, financed a lavish lifestyle, personal business ventures, and high risk personal investments.
• When funds were actually invested, the results were not only less than promised, but resulted in substantial losses.
• Conceal the fraud and the losses with fake account statements reporting high returns
• Depleted the investment pool.

Know better, do better, avoid charity scams. Maybe a little cynicism is a good thing. Tell your grandma – ain’t no such thing as 800%.

It’s easy to check up on a non-profit on Guidestar. Take a look at their tax return before you hand over your time or treasure!

Image Credit: twodolla, Flickr