Ponzi schemes and affinity fraud frequently overlap because both exploit trust and social interactions to operate effectively. A Ponzi scheme relies on a continuous stream of new investors to pay returns to earlier participants, creating the illusion of a profitable enterprise. To maintain the flow of funds, fraudsters often target affinity groups—close-knit communities connected by shared identity, such as religious organizations, cultural associations, or professional circles.
These groups provide an environment where trust is already established, making it easier for Ponzi scheme promoters to recruit participants quickly. When an investment opportunity is endorsed by someone familiar, skepticism tends to diminish. This sense of security often discourages individuals from conducting independent research or due diligence, as they assume that a trusted member’s involvement and/or endorsement of the investment opportunity guarantees legitimacy. In other words, social proof becomes a powerful tool for deception.
Ponzi schemes and affinity fraud also thrive in settings where doubts can be suppressed. If concerns arise, the promoter can dismiss them as misunderstandings or pressure the group to maintain harmony, discouraging dissent. Victims themselves may avoid reporting the fraud out of fear of damaging the group’s reputation or relationships within it.
Finally, affinity fraud capitalizes on emotional bonds. People feel a sense of loyalty and belonging, which makes them more inclined to invest and less likely to question warning signs and red flags. This emotional leverage, combined with the urgency and trust that Ponzi schemes exploit, creates an ideal environment for fraud to flourish.
On September 8, 2025, the Securities and Exchange Commission (“SEC”) announced (here) that it filed charges against Arsalan A. Rawjani (“Defendant”) and the business enterprise he operated, Trade with Ayasa, LLC (“TWA”), which operated through various corporate forms, for allegedly conducing an affinity fraud and Ponzi scheme centered in the North Texas Ismaili Muslim community, where Defendant was an active member and community leader.
According to the SEC, since at least 2021, Defendants perpetrated an investment fraud and Ponzi scheme targeting members of the Ismaili Muslim community in Texas, among other victims. Touting himself as an experienced and skilled options trader and investor, Defendant allegedly represented to investors and potential investors that he operated a successful pooled-investment program that offered guaranteed monthly dividend payments as well as principal protection that would be paid from Defendant’s options trading and asset management. The SEC alleged that Defendant claimed to have raised approximately $18 million from investors between 2021 and 2024. Although Defendant represented to these investors that his successful options trading enabled him to pay a fixed, monthly return of (usually) three to five percent of principal (i.e., a 60-percent annual return), he actually paid most “returns” by using new investor money and derived insignificant or no profits from his touted options-trading expertise, alleged the SEC. Additionally, said the SEC, Defendant diverted millions of dollars of investors’ money to himself, his spouse, and others through undisclosed withdrawals, commissions, and loans, all of which contributed to the collapse of his Ponzi scheme and millions of dollars of investor losses.
To carry out the Ponzi scheme and recruit new investors to support it, the SEC alleged that Defendant directly and through TWA made numerous false and misleading statements to investors, including promising that his clients’ investments would be used for his profitable options trading and that investors’ principal was guaranteed from his trading profits and other secure investments. For example, said the SEC, Defendant claimed he would use investors’ funds in his trading program, but he sent only approximately $1 million of investor funds from TWA’s primary bank account to a broker dealer for trading in the options market. Thereafter, claimed the SEC, Defendant transferred back to the bank account less than $166,000 in presumed trading profits and thus had no meaningful trading revenues to pay the millions of dollars promised to investors.
Defendant also claimed that a large reserve was maintained to pay dividends and offered his personal “guarantee” to some investors, said the SEC, despite maintaining neither reserves nor personal assets sufficient to repay the millions of dollars raised from investors.
The SEC alleged that by late-2023, Defendant’s “lackluster or losing trades” and his inability to attract new investors caused his Ponzi scheme to collapse, resulting in Defendant ceasing to make promised dividend payments. Nevertheless, said the SEC, even after he was unable to make divided payments to earlier investors, Defendant continued to solicit new investors using the same promises and guarantees of monthly payments and principal protection. According to the SEC, bank records showed that Defendant raised more than $2 million from investors between in or about December 2023 and June 2024, during the period he was unable to make promised payments to earlier investors.
The SEC filed its complaint (here) in federal district court in Dallas, Texas. The SEC charged Defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charged Defendants with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. The SEC seeks injunctive relief, disgorgement plus pre-judgment interest on a joint and several basis, and civil penalties.
[1] This Blog has written scores of articles addressing SEC enforcement actions and the settlement of enforcement actions involving Ponzi schemes and affinity frauds. To find such articles, please visit the Blog tile on our website and search for “Ponzi schemes”, “Affinity Fraud” or any SEC enforcement action issue that may be of interest to you.
[View source.]
