Many times "Ponzi" or pyramid schemes are employed in affinity fraud scams where money invested by new investors is used to make payments to earlier investors, which gives the earlier investors the false impression that their investments are successful. This illusion of success tricks new investors into investing in the scheme, and lulls earlier investors into a false sense of security about their investments while the fraudster is actually stealing the money. Both types of schemes depend on a steady stream of new investors. Then, the inevitable occurs the supply of investors dries up, the pyramid collapses and investors lose most, if not all, of their money.
Because of the tightknit structure of many groups, regulators and law enforcement officials find it very difficult to detect an affinity scam. Victims of these scams often do not notify the authorities or assert their legal rights, because they are uncomfortable with the idea of getting "one of their own" in trouble with the police. Instead, they try to deal with the wrongdoer within the group, which keeps the information from getting out and helping other people avoid being scammed.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.