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The purpose of this paper is to illustrate how a financial fraud practice, known as affinity fraud, relies on building trust with victims based on shared affiliations or characteristics such as age, race, religion, ethnicity or professional designations, for the purpose of exploiting the trust factor for financial advantage.

Sources of information consisted of scholarly articles and articles retrieved from the web.

Findings suggest that these fraud offenders rely on a myriad of persuasion techniques to overcome offender skepticism coupled with victims engaging in a psychological concept known as projection bias to evaluate the credibility of these offenders. These factors create a negative synergy that dilutes the perceived need for due diligence normally required prior to engaging in securities transactions. In addition, these offenders display a predatory quality, debunking the myth that fraud offenders exhibit a homogenous crime group behavioral profile.

Social institutions that include both for profit and not for profit should consider evaluating their interactions with those who share similar characteristics and affiliations that attempt to offer goods or services by considering some of the factors contained within this article that may dilute due diligence protocol.

This paper serves to alert and educate anti‐fraud professionals, law enforcement and policy makers of a predatory fraud practice that targets organizations exploiting the inherent trust that these organizations rely upon.

The purpose of this paper is to illustrate how a financial fraud practice, known as affinity fraud, relies on building trust with victims based on shared affiliations or characteristics such as age, race, religion, ethnicity or professional designations, for the purpose of exploiting the trust factor for financial advantage.

Sources of information consisted of scholarly articles and articles retrieved from the web.

Findings suggest that these fraud offenders rely on myriad persuasion techniques to overcome offender skepticism coupled with victims engaging in a psychological concept known as projection bias to evaluate the credibility of these offenders. These factors create a negative synergy that dilutes the perceived need for due diligence normally required prior to engaging in securities transactions. In addition, these offenders display a predatory quality. debunking the myth that fraud offenders exhibit a homogenous crime group behavioral profile.

Social institutions that include both for profit and not for profit should consider evaluating their interactions with those who share similar characteristics and affiliations that attempt to offer goods or services by considering some of the factors contained within this paper that may dilute due diligence protocol.

This paper serves to alert and educate anti‐fraud professionals, law enforcement and policy makers of a predatory fraud practice that targets organizations exploiting the inherent trust upon which these organizations rely.

The purpose of this paper is to illustrate how a financial fraud which originates as an affinity fraud can utilise the interpersonal trust, which is a central feature of an affinity fraud, to move the fraud into situations such as organizational markets, where personal relationships are much less dominant.

Sources of information consisted of scholarly articles and articles retrieved from the web.

The trust which develops naturally between members of a community with common interests can be exploited by a fraudster who is, or purports to be, a member of that community. This trust can then be used as the basis of creating trust within other types of relationships – especially where some people are active in more than one relationship – where personal relationships play a minor role.

Both individuals and organizations when making investments should regularly formally evaluate their relationship with the organization in whom they are investing; constantly evaluate alternative relationship opportunities; and, calculate how divergent the partner's behaviour can be from the expected before dissolving the relationship.

This paper, by utilizing Fiske's Relational Models Theory, argues that trust that has been developed in a communal situation can be used to build up a momentum of trust. This enables the perpetrator of a fraud to extend the fraud into situations where different types (and possibly impersonal) relationships operate.

The purpose of this study is to elaborate on how schemers build and maintain trust essential for financial fraud that persists over many years. A Ponzi scheme is a form of financial fraud that involves repeated interaction with an increasingly large number of individuals over a long period time. This type of fraud involves the building and maintenance of each individual’s trust. All Ponzi schemes come to a dramatic conclusion. Either the schemer defaults on payments, or someone gets suspicious and the scheme is uncovered. Understanding how schemers build and maintain trust may help prevent or uncover the fraud earlier, limiting financial devastation endured by unsuspecting investors, as well as externalities inflicted on the financial system as investors lose trust.

This study combines an understanding of trust accumulation from multiple disciplines in the existing literature to build a comprehensive model of trust creation and maintenance in Ponzi schemes.

This study finds that key characteristics of both the trustor and trustee contribute to long term financial arrangements. Schemers prey on individuals with specific characteristics that indicate they are more trusting. Trusting individuals are less likely to conduct due diligence to detect fraud. Prevention and detection of fraud are made more difficult by convincing, yet false, mimicry used by schemers to signal trustworthiness.

Bringing together multiple views on trust allows creation of a comprehensive model of trust that captures key characteristics of unsuspecting investors and schemers who prey on them in financial fraud.

This paper aims to empirically identify factors that increase consumer vulnerability to pyramid scheme fraud and compares/contrasts dynamics and implications of pyramid and Ponzi fraud.

Statistical techniques, including multiple regression, are used to analyze participant data (with over half a million individuals) from a now-defunct US-based pyramid scheme, Fortune Hi-Tech Marketing.

Findings suggest that this pyramid scheme flourished in counties with identifiable affinity groups: religious communities, Hispanic populations and certain age cohorts (e.g. recently retired). Recruitment success varied significantly between geographic regions, with the highest levels of recruitment in the South. While prior research finds a possible positive relationship between education and Ponzi participation, this is not the case in the pyramid scheme studied. Furthermore, while Ponzi schemes might be pro-cyclical, collapsing during contractions when participants seek to extract their money, this pyramid scheme exhibited counter-cyclical behavior.

State and federal regulators, as well as consumer protection advocates, should learn from analysis of past pyramid scheme cases. Such analysis informs allocation of scarce resources and supports the case for targeted, active education. Clarifying differences between Ponzi and pyramid fraud helps to support clear and effective intervention.

This is the first research to analyze national participant-level data from a pyramid scheme to inform future action. While it confirms some past findings, such as the connection to affinity fraud, it adds to collective knowledge on pyramid schemes and the differences between pyramid and Ponzi fraud.

The purpose of this study is to examine whether victims of financial crimes are also affected by anomie. Fraud from supposed financial advisors leaves many victims feeling uncertain of their financial future and betrayed by people they trusted. This is felt even more when victims are betrayed by people in their own community. Previous research (see Hövermann et al. 2015a, 2015b, 2016, 2018) has found that individuals susceptible to the capitalistic values of the USA and other Western nations are more likely to cheat (Muftic, 2006), engage in rule-breaking (Zito, 2018) and believe in egoistic individuality (Hövermann et al. 2015a). This belief in these values could also increase the chance of victimization.

The authors used an experimental survey to assess whether institutional anomie theory (IAT) can also affect victimization at the individual level.

The authors find support for Messner and Rosenfeld’s (2001) IAT. An interaction was present, which revealed that IAT is more predictive when individuals are high in financial need. When individuals are desperate, they will find whatever means possible to meet the expectations of the American Dream, even if it involves investing their life savings with a potential fraudster.

This paper examines IAT as it relates to victim behavior. Further, this paper links the techniques of offenders using shared social status (i.e. affinity) with criminological theory.

The purpose of this paper is to investigate the processes of open innovation in the context of a fraudulent organization and, using the infamous Bernie L. Madoff Investment Securities fraud case, introduces and elaborates upon the concept of dark open innovation. The paper’s conceptual framework is drawn from social capital theory, which is grounded on the socio-economics of Bourdieu, Coleman and Putnam and is employed in order to make sense of the processes that occur within dark open innovation.

Given the self-evident access issues, this paper is necessarily based on archival and secondary sources taken from the court records of Madoff v. New York – including victim impact statements, the defendant’s Plea Allocution, and academic and journalistic commentaries – which enable the identification of the processes involved in dark open innovation. Significantly, this paper also represents an important inter-disciplinary collaboration between academic scholars variously informed by business and history subject domains.

Although almost invariably cast as a positive process, innovation can also be evidenced as a negative or dark force. This is particularly relevant in open innovation contexts, which often call for the creation of extended trust and close relationships. This paper outlines a case of dark open innovation.

A key implication of this study is that organizational innovation is not automatically synonymous with human flourishing or progress. This paper challenges the automatic assumption of innovation being positive and introduces the notion of dark open innovation. Although this is accomplished by means of an in-depth single case, the findings have the potential to resonate in a wide spectrum of situations.

Innovation is a concept that applies across a range of organization and management domains. Criminals also innovate; thus, the paper provides valuable insights into the organizational innovation processes especially involved in relation to dark open innovation contexts.

It is important to develop and fully understand the possible wider meanings of innovation and also to recognize that innovation – particularly dark open innovation – does not always create progress. The Caveat Emptor warning is still relevant.

The paper introduces the novel notion of dark open innovation.

Dubious investment schemes by unlisted companies are alluring individual investors at the base of the pyramid to invest money and lose them. The purpose of the abstract is to identify the factors that induce the people at base-of-pyramid (BoP) to invest in fraudulent schemes.

Open-ended interviews of people at the BoP from areas in and around Kharagpur town in West Bengal were conducted. Through open coding, codes, categories and themes were generated.

Interpersonal trusts form the central feature of investment fraud. The personal relationship among the community members helps these schemes thrive. False hopes of higher returns within a short span combined with constraints of accessing banking services is another motivation for the people at the base of the pyramid to fall prey to these schemes. With limited education, they find these investment avenues convenient providing scope to the perpetrators of fraud to exploit them. To curb these dubious schemes to flourish and exploit the people at the BoP, financial inclusion on a large scale is required. Moreover, the government should take steps to educate the mass at the base of the pyramid.

This study offers new insights on the victims of investment fraud in India those belonging to the economically weak groups and lower income groups comprising together as the BoP) of the society.