religious or group based fraud

Religious Group Fraudster Charged By SEC

Feb 10, 2020

The Securities and Exchange Commission, (“SEC”) on January 29, 2020, charged a Pennsylvania man with defrauding Amish and Mennonite community members when he falsely represented how he would use their funds and by guaranteeing returns on their investments. The SEC complaint alleges that Philip E. Riehl while providing accounting services to Amish and Mennonite communities, developed his own investment program using money raised by selling promissory notes to community members. According to the complaint, over a nearly ten year period, Riehl raised approximately $60 million by promising to invest the funds in business and real estate loans to others in their religious community. As alleged in the SEC complaint, Riehl falsely claimed that two co-signers would be on every loan, and he personally guaranteed repayment of the investments with interest. The SEC further alleges that Riehl sold Trickling Springs Creamery promissory notes, investments in a dairy business that he owned, concealing from investors the company’s financial difficulties. In his 2019 letter to investors, Riehl allegedly apologized for his dishonesty, admitting  that his statements created a “false sense of security, in that such a considerable percentage of the funds were channeled into my personal projects.” Trickling Springs Creamery filed for bankruptcy in December 2019, leaving Riehl unable to pay back investors. In the press release announcing the charges, the SEC warns  that  “Promises of guaranteed returns or investments without risk are classic warning signs of fraud.” It cautioned investors who invest with someone in their faith-based community stating that “[i]t is important to learn as much as possible about your investments, even if it means questioning someone you know and trust….” What is Affinity Fraud? Affinity fraud refers to investment scams that prey upon members of specific groups, such as religious or ethnic communities, the elderly, or professional groups. The scammers who run affinity frauds frequently are – or pretend to be – members of the group. According to the SEC, they often try to fool respected community or religious leaders from the group to spread the word about the scheme by convincing leaders that a fraudulent investment is legitimate. Many times, even those group leaders become unwitting victims of the fraudster’s scheme. Affinity scams exploit the trust and personal friendships in groups of people who have something in common. Because of the tight-knit structure of many groups, regulators and law enforcement officials have difficulty detecting an affinity scam. Sadly, victims often fail to notify authorities or bring legal claims and instead try to work things out quietly within the group. This is often the case when the fraudsters have involved respected community or religious leaders to convince others to join. Many affinity scams involve Ponzi or pyramid schemes, where new investor money is used to pay off earlier investors creating the impression the investment is profitable. Such tricks are used to lure new investors in the scheme and to lull existing investors into believing their investments are safe. In reality, in most Ponzi schemes,  the fraudster almost always steals investor money for personal use. Because each of these types of investment schemes depends on an unending supply of new investors […]

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