The Ponzi scheme, which continued for 15 years, landed Merriman behind bars, and his investors out of money.

What Merriman did is considered affinity fraud — where a perpetrator tries to swindle a specific group out of money. While Merriman was already a long-standing member of the Church of Latter-day Saints, other fraudsters have been known to specifically infiltrate a group with the sole mission of perpetrating a scam. The method of operations is simple. The person is introduced to the group, joins the group, and establishes a relationship of trust. Once trust is established, the scam has the potential to spread like wildfire — especially at a time when nearly 1 in 4 financial fraud schemes in America are actually cases of affinity fraud, according to a recent report by Marquet International, a professional consultancy.

Characteristics of Affinity Fraud

“Ponzi schemes are almost always marketed as something exclusive or selective,” said Tracy Coenen, a forensic accountant and fraud investigator. “Ponzi schemes play on our human nature, including our trust and our desire to be part of something special.”

This is why using a church or an ethnic group as an “in” is so effective, she said. People in these groups are typically trusting of other members. The common ground helps overcome the trust hurdle.

“Getting people to part with their money requires trust,” Coenen said. “If an individual or group you trust is part of the investment or has recommended it, the victim is more likely to become involved.”

While exclusivity is a tool used to draw people in, it also is used to explain the secrecy of the investment or answer questions that may arise from investors.

“[Investors] can’t go talk to [their] accountant or attorney, because that would violate the secrecy and exclusivity,” Coenen said. “You aren’t able to research the investment because it is top secret. If things don’t make sense to you and you start questioning the investment, the exclusivity factor will help explain things away.”

Why Don’t Investors Do Their Homework?

These schemes appear to offer an investment solution that allows investors to earn money quickly.

“It’s security foremost. With an unpredictable stock market, many older investors are worried about retirement and having enough money saved,” Coenen said.

Even investors who have been burned by the stock market are still willing to take very high risks.

“They say the stock market hasn’t worked for them, so they need to try something else. They think about ‘rich’ people investing in private investments, and assume that must be the way to make money,” Coenen said.

Unfortunately, that assumption usually causes people to fall for scams that turn out to be Ponzi schemes. Instead of making money, people lose what they already have.

Preying On the Congregation

Investors are so eager to make money that they largely ignore the potential downsides of these investments.

“You see in news stories the people saying they lost their entire savings in Ponzi schemes,” Coenen said. “How could they let this happen? Why weren’t they considering the downside of the investment? Why did they ignore the potential of losing everything? They trusted people, saw that others were earning large sums of money and threw caution to the wind.”

When some members of Merriman’s congregation trusted him with their money, he used it to fund a lavish lifestyle — buying up classic cars, a boat and a 350-piece art collection.

Merriman’s mother, Sally Merriman, was one of his victims.