Renaissance Asset Fund Accused of Jehovah's Witness Affinity Scam
Affinity scams are a very real issue in our financial industry. This type of fraud typically preys upon members of a group. Examples include church groups, ethnic communities, professional groups, and the elderly. The person committing the fraud pretends to be a member of the group, and then uses this connection to gain investors in the scheme. The trust and friendship of the group members is manipulated and abused.
One recent example of affinity fraud involves Renaissance Asset Fund, Inc., Ronald J. Nadel, and Joseph M. Malone. The U.S. Securities and Exchange Commission (the “SEC”) filed civil fraud charges against the company and individuals over allegations that they had raised over $16 million by exploiting certain Jehovah’s Witnesses congregations. Nadel and Malone were principals of Renaissance. The SEC reported that more than 190 investors nationwide were affected by the scam. Many were elderly.
In the complaint filed by the SEC, additional allegations included:
- That between March 1999 and April 2004, the defendants raised funds for alleged projects that included an outlet mall, a Swiss bank, and an international currency exchange.
- The defendants told their investors that their investments would earn returns of between 10 – 25% over a period of as little as four months.
- The defendants issued quarterly account statements containing fake profits.
- Assuming that their investments were successful, many victims then reinvested their principal and earnings into new projects presented by the defendants.
- Some of these projects were entirely fictitious.
- Other projects that did exist were unsuccessful.
- Most investors never received a return of their principal or any interest.
Renaissance, Nadel, and Malone were operating a true Ponzi scheme. They paid their first investors with money that was raised from new investors. Instead of investing the funds as promised, the defendants used it for their own personal benefit. This included:
- Country club memberships
- Car leases
- Retail purchases
The SEC accused the defendants of multiple violationsof the Securities Act of 1933, and the Securities Exchange Act of 1934. The complaint sought final judgments that would permanently enjoin them from “violating or aiding and abetting violations of the antifraud and registration provisions of the federal securities laws.” They also sought disgorgement of the ill-gotten gains, including prejudgment interest, an accounting, and various civil penalties.