Prosecutors Pursue Affinity-Fraud Cases in Which Scammers Target Their Own

U.S. Attorney Breon Peace focuses on affinity frauds, which can be hard to prosecute because victims might be unwilling to cooperate with the authorities.
U.S. Attorney Breon Peace focuses on affinity frauds, which can be hard to prosecute because victims might be unwilling to cooperate with the authorities.

Summary

Away from headline-grabbing prosecutions, a U.S. attorney in Brooklyn makes a push to protect close-knit ethnic and religious communities.

Stockbroker Mina Tadrus recruited investors in his hedge fund from communities that trusted him the most: his relatives and fellow Egyptian Coptic Christians in Brooklyn, N.Y., and around the U.S.

In his pitch, he promised annual returns of as much as 30% and claimed to use artificial intelligence to make high-frequency trades.

In reality, the fund was a $5 million Ponzi scheme that Tadrus used to cover meals at restaurants, make car payments and shop at luxury retailers, prosecutors said when they charged him in September.

The case of Tadrus, who has pleaded not guilty, is part of a push by U.S. Attorney Breon Peace in Brooklyn and other law-enforcement officials to focus on financial scams, called affinity frauds, that target close-knit communities, often built on bonds of ethnicity, nationality or religion. The alleged perpetrators are usually members of those communities—or at least pretend to be—and the cases can be a challenge to prosecute, in part because it can be difficult to persuade victims to talk or cooperate with the authorities.

Peace, whose jurisdiction is one of the most diverse in the U.S., has brought more than 10 recent cases. His office is prosecuting the owner of an airline-ticket company charged with running a $23 million Ponzi scheme that targeted members of the Indonesian and Indo-American community.

Another case centers on a Brooklyn credit-counseling business that allegedly stole $2.8 million from members of New York’s Russian immigrant community who had come for help modifying their mortgages. And in March, a Queens, N.Y., man pleaded guilty to fraud for stealing more than $1 million from fellow members of the Bengali-American community who invested in bogus real-estate deals.

The Brooklyn office also has been publishing Justice Department alerts and announcements in several languages. Peace said he realized the importance of those translations in his first month in office during the trial of John Won, who was convicted in 2021 of defrauding Korean-Americans in an investment scheme that falsely promised no-risk returns through foreign-currency trading.

“What struck me when I watched the trial was how important language was in connection with the fraud scheme," said Peace, adding that positive information about the investments was in Korean and risks were detailed in English.

One of the largest recent affinity-fraud cases came from the neighboring federal district in Manhattan, N.Y. Eddy Alexandre, the chief executive of crypto exchange EminiFX, pleaded guilty in February 2023 to defrauding over 25,000 investors out of more than $248 million. Most of the victims were members of the Haitian community and the Seventh-day Adventist Church, according to the Manhattan U.S. attorney’s office, which brought the case.

Alexandre, a Haitian immigrant who was a deacon in the Adventist church and the son of a well-known pastor, would host weekly Zoom sessions in which he falsely promised to double investors’ money within five months and claimed to use AI trading technology.

“He would spread his stuff through the churches, through members," said Phucien Baptiste, a victim who lost more than $25,000. “He got people to believe in him like he was doing something. In reality, he was not doing anything."

Separately, the Securities and Exchange Commission, which handles civil enforcement, has brought more than 30 affinity-fraud cases since March 2022. The agency last year charged a former New Jersey corrections officer with investment-fraud schemes targeting law-enforcement personnel, and a Florida man with duping church members through a $35 million Ponzi scheme.

The SEC also accused a former Los Angeles resident of defrauding members of his Orthodox Jewish community of $47 million through fake investment opportunities. The man provided investors with Hebrew documents that made the transactions legal under Jewish religious law, the agency said.

The Federal Bureau of Investigation has seen a range of affinity frauds tied to current events ranging from natural disasters to armed conflicts, said Assistant Special Agent in Charge Paul Roberts, who leads the complex-financial-crimes branch in the FBI’s New York office. He said the bureau was on the lookout for fraudulent charity schemes targeting Jewish communities that seek to leverage the Oct. 7 Hamas attack on Israel.

“Folks will look at newsworthy events and how those impact certain communities, and exploit that," Roberts said.

Write to Corinne Ramey at corinne.ramey@wsj.com and James Fanelli at james.fanelli@wsj.com

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