The intersection of affinity fraud and Ponzi schemes is a recurring theme in securities enforcement. Although each theory is distinct, they frequently appear together in SEC enforcement actions.

In today’s article, we examine the SEC’s enforcement action against Wisdom Capital Management Group Ltd., an entity that claimed to be an Exempt Reporting Adviser (“ERA”) under the Investment Advisers Act of 1940 (“Advisers Act”). While ERAs are exempt from SEC registration, they remain subject to the SEC’s examination authority and must provide accurate, verifiable disclosures.

On June 5, 2026, the SEC charged an investment adviser and related entities with a multi-year fraud involving a pooled investment fund that raised about $4 million from 28 investors. The SEC alleged the defendant misappropriated and commingled funds, concealed losses exceeding $3.6 million, and diverted assets for personal use.

Affinity fraud is a form of financial fraud that relies on social connections and trust. It most often occurs within identifiable groups, such as religious, cultural, or ethnic communities, or social organizations, where members share common values, experiences, or identities. Rather than approaching targets as strangers, those promoting the scheme position themselves as insiders, using familiarity and perceived credibility to create comfort and reduce skepticism.

Financial abuse of seniors and other vulnerable adults is among the most damaging and the least visible forms of investor harm. It arises when age, illness, cognitive decline, or dependence on trusted professionals erodes an individual’s ability to evaluate advice or resist coercion, even while legal capacity nominally remains intact.

By: Jeffrey M. Haber Financial exploitation of seniors and vulnerable adults is a significant problem.¹ It is considered by many to be an insidious non-violent form of elder abuse in the United States. While a landmark MetLife study initially estimated that older Americans lose roughly $2.6 to $2.9 billion each year to financial exploitation, more recent research suggests that the cost may be materially higher, potentially exceeding $36 billion annually. These numbers, whethe

Ponzi schemes and affinity fraud frequently overlap because both exploit trust and social interactions to operate effectively.

On August 1, 2025, the Securities and Exchange Commission (“SEC”) announced (here) that it charged a Wisconsin resident and three limited liability companies that he owns and controls – Investors Capital LLC, Global Investors Capital LLC, and High Income Performance Partners LLC (collectively, the “Entity Defendants”) – with perpetrating a real estate-related offering fraud.

The Custody Rule provides that “it is a fraudulent, deceptive, or manipulative act, practice or course of business within the meaning of section 206(4) of the [Advisers] Act … for [a registered investment adviser] to have custody of client funds or securities unless” the adviser implements an enumerated set of requirements to prevent loss, misuse, or misappropriation of those funds and securities.

On June 26, 2025, the Securities and Exchange Commission (SEC”) announced (here) that it charged a Manchester, New Hampshire resident, a real estate investment coach and real estate investment coach, with defrauding investors through real estate investment schemes resulting in losses of at least $3 million.

Today, we examine an enforcement action brought by the SEC involving a Ponzi-like scheme that targeted retired senior citizens that the defendant met through his church community

The allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading served as the underlying predicate for the claims asserted by the Securities and Exchange Commission (“SEC”) against Ramil Palafox (“Defendant”), the founder of Praetorian Group International Corporation (“PGI Global”), a now-defunct entity he controlled, in S.E.C. v. Palafox, Case 1:25-cv-00681 (E.D. Va. 2025). The case marks the first crypto enforcement action under the new Chairma

A Ponzi scheme is intended to give investors the false impression that their investment is profitable. In a Ponzi scheme, the fraudster/promoter pays early investors with money that the investor believes is the return on his/her/its investment. In actuality, the money used to pay the investor comes from the investor’s own principal investment dollars or the pooled investment dollars of subsequent investors.

The SEC’s Findings On September 28, 2016, one day before the Securities and Exchange Commission (“SEC”) announced its first stand-alone action to enforce Section 21F(h) of the Securities Exchange Act of 1934 (discussed on this Blog here), the SEC settled with Anheuser-Busch InBev SA/NV (“AB InBev”) for its alleged violations of the Foreign Corrupt Practices Act (“FCPA”) and the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Pursu

By Jeffrey M. Haber What type of fraud is Laurence Balter accused of? Laurence Balter, a former fund adviser and registered investment advisor, stands accused by the Securities and Exchange Commission ("SEC") of "multiple breaches of fiduciary duty." Breaches of fiduciary duty occur when financial advisers prioritize their own interests over those of their clients. The SEC accuses Balter, who was operating through Oracle Investment, located in Washington and Hawaii, of collec

On September 29, 2016, the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) announced that Och-Ziff Capital Management Group LLC (“Och-Ziff”), a New York-based alternative investment and hedge fund manager, and OZ Africa Management GP LLC (“OZ Africa”), its wholly-owned subsidiary, agreed to pay more than $400 million to settle charges that they used intermediaries and business partners to bribe officials of various African governments. The SEC

On September 29, 2016, the Securities and Exchange Commission (the “SEC” or the “Commission”) announced that International Gaming Technology (“IGT”), a casino-gaming company, agreed to pay $500,000 to settle charges of retaliating against one of its executives with several years of positive performance reviews because he reported to senior management and the SEC concerns about the accuracy of IGT’s financial statements. According to the SEC’s order, within weeks of raising co

On September 14, 2016, Andrew Ceresney (“Ceresney”), Director, Division of Enforcement of the Securities and Exchange Commission (the “SEC” or “Commission”), spoke at the Sixteenth Annual Taxpayers Against Fraud Conference in Washington, D.C. Ceresney covered a lot of ground during his presentation, addressing issues such as the impact of the whistleblower program to the role of whistleblowers and their attorneys in the investigation and claims process. Impact of the Whistleb

How can I protect my business from conduct risk? The U.S. Attorney in Manhattan recently announced a number of charges against two former executives of American Realty Capital Properties, Inc. ("American Realty"), a real estate investment trust ("REIT"), for their role in a 2014 accounting scandal. Brian Block, the former chief financial officer ("CFO"), is facing six criminal counts for securities fraud, conspiracy and the making of false statements. Lisa McAlister, the REIT

By Jeffrey M. Haber On September 20, 2016, the Securities and Exchange Commission (“SEC”) announced that it awarded more than $4 million to a whistleblower who provided original information about a fraud that resulted in the recovery of monetary sanctions. Since 2011, the SEC has awarded more than $111 million to 34 whistleblowers pursuant to the agency’s whistleblower program. The SEC did not identify the whistleblower. By law, the SEC protects the confidentiality of whistl