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Posted Date: 12/12/2008
Secretary of State Warns that Nevadans Can be Victims of the Same Technique Used in the Multimillion Dollar Madoff Case

(Carson City, NV; 12/30/09) -- The biggest financial scandal of the year was based largely on trust, and Secretary of State Ross Miller warns that Nevadans’ willingness to trust someone they do not really know could make them the next victims of a financial scam. Bernard Madoff used his friendships and the trust of associates to raise hundred’s of million s of dollars in his high stakes Ponzi scheme, and like the Ponzi scheme itself, there is a long history of using “affinity groups”, churches, social organizations, and other networks of friends and colleagues to gain the trust of what will ultimately become victims. While many of Madoff’s victims were, like him, financially sophisticated and wealthy, many more victims of affinity fraud are much less so.

“Affinity fraud is the wolf in sheep’s clothing approach for those operating fraudulent investment schemes,” said Miller. “Someone who is a regarded member of your church group or a professional organization uses that association with you to develop a false sense of trust. There are instances of affinity fraud within the whole range of religious organizations and cultural and ethnic groups. It plays on our basic tendency to trust those whose interests and values are similar to ours. Ultimately and sadly, that kind of trust is not a key to good investment strategy.

“My office provides resources to check to see if the securities you’re offered are registered, and check to see if the people offering them to you are registered or licensed. Frequently, that doesn’t take any more than a brief visit to our website at”

The Secretary of State’s Securities Division offers these things to consider as part of your investment strategy:

Beware of “affinity groups.” Someone’s ability to attend the same church as you says nothing about their actual honesty or their investment acumen.

Don’t buy what you don’t understand. If the investment instruments are confusing to you, don’t just accept someone else’s explanation. Don’t invest until you are comfortable with your understanding of the deal.

If it sounds too good to be true…As hackneyed a phrase as it has become, it is a guideline well worth keeping in mind.

Know your investment advisor’s auditor. If you receive statements directly from your advisor, make sure that the advisor is being regularly audited.

Diversify. Not only is this a frequent strategy in terms of maintaining a reasonable return, it’s also a security measure to ensure that one person doesn’t have control of all of your investments.

Check with the Nevada Secretary of State’s Securities Division before you invest.

For more information on how to choose an investment professional, go directly to , or follow the Securities Center “investor education” links at . Nevadans who believe they have been the victim of investment fraud can contact the Secretary of State’s office at (702) 486-2440, (775) 688-1855, or (800) 758-6440.