SEC Combats Scourge of Affinity Fraud With Proactive Experiment

Sanjay Singh pitched an investment in his Florida trucking company as a path for the middle class to achieve the American dream.

Money would be used to expand his fleet and build out the company’s operations, with investors guaranteed to make returns of 12.5% to 325%, the pitch went, according to authorities.

“We take the risk, we take the liability, you enjoy the investment,” he said in a 2023 promotional video, “Driving American Dream.” “That is our business model.”

Singh’s company, Royal Bengal Logistics, took in $112 million before the Securities and Exchange Commission shut it down, alleging Singh was running a Ponzi scheme targeting South Florida’s Haitian American community. Singh has denied the allegations.

The SEC’s investigation was part of an experiment from its regional office in Miami, home to one of the largest US immigrant populations, to more proactively root out fraud targeting people of particular religious, social, or ethnic groups.

The agency has brought more than 30 cases alleging affinity fraud since 2022, when the Miami program began, according to agency data. The Fraud Against Minority Groups Initiative has been credited in several of them, and is inspiring similar efforts in other parts of the country.

“The initiative strives to serve as a counter to some of the fraudsters’ most potent tools in their schemes,” said Eric Bustillo, the Miami office director.

Authorities face a number of challenges in preventing affinity fraud.

Alleged fraudsters often are part of the group they’re trying to defraud, or pretend that they are, and establish their credibility by appealing to the trust that members of the group share, University of Pennsylvania law professor Lisa Fairfax wrote in an academic paper. This group trust and sense of community can persuade otherwise cautious people to participate in fraudulent schemes.

The perpetrators also benefit from the mistrust of law enforcement that many immigrants brought with them.

“To paraphrase one prominent securities regulator, ‘You can trust me because I’m like you’ is a siren song that has been used in recent years to defraud many investors,” Fairfax wrote.

Countering Fraudsters’ Tools

The SEC is trying to combat that by going into targeted communities to educate people about the warning signs of fraud. It also looks to identify scams in time to freeze fraudsters’ ill-gotten gains and give investors a chance at recovery.

Cases brought by the SEC this year charge schemes targeting Latino, Nigerian American, and Indian American communities. But affinity fraud has hit the Haitian community particularly hard.

Singh ensnared hundreds of Haitian Americans among the estimated 1,500 victims, according to the SEC.

Separately, New York Attorney General Letitia James (D) in June sued crypto companies NovaTechFX and AWS Mining Pty Ltd., accusing the companies of defrauding investors, including Haitian immigrants, out of more than $1 billion in cryptocurrency. The SEC filed its own civil suit against NovaTech on Aug. 12.

And earlier this year, a judge in the US District Court for the Eastern District of New York sentenced a Brooklyn man to two years in prison for an investment fraud that targeted Haitian Americans living in Brooklyn and Queens.

The First Born Again Baptist Church in Miami, with a congregation of more than 350 predominately Haitian American members, has hosted SEC staff members twice in recent months.

Pastor Fritzner Jules said the SEC’s presentations included tips for protecting against credit card fraud. He said he’d “strongly” recommend the SEC’s presentation to other churches and community groups in the Haitian community.

Information the SEC presented “is what we need the most,” Jules said.

The SEC’s Los Angeles and San Francisco offices in May started an initiative, the “Western Alliance to Protect Targeted Communities,” to pursue at an early stage investment frauds that target identifiable communities. Similarly, the New York and New Jersey offices have teamed up for a “FraudWise” education program to target affinity fraud.

“We have seen tremendous success in the initiative that the Miami Regional Office has spearheaded, and we are working to replicate these efforts and achievements in other parts of the country where we see fraudsters targeting minority communities,” the SEC’s enforcement director, Gurbir Grewal, said.

Wanting Better Future

In the case against Singh’s Royal Bengal Logistics, the SEC won an emergency order freezing the company’s assets and appointing receivers to trace and recover investor funds.

The receivers’ efforts continue, according to an Aug. 12 court filing, which includes bringing lawsuits against two former RBL employees to recover “unusual payments” that exceeded $1 million. The receivers also sold several trucks and RBL equipment, including laptops and computer monitors.

The SEC brought another civil case last month against two other RBL executives involved in the alleged scheme.

Singh in court filings accused the SEC of making inaccurate statements in its complaint. He and RBL had assets “to support any emergency relief for the so-called investors” and the “Haitian American community made substantial amount of profit in partnering with the defendants,” Singh wrote.

“My position is that this is affinity enforcement against minorities in South Florida who collectively wanted to do business together and they labeled them as a Ponzi scheme,” Singh said in an interview.

Singh also faces criminal charges, including wire fraud. The criminal case is scheduled for trial in October in Fort Lauderdale, Fla. If convicted of all charges, he faces up to 150 years in prison.

Hundreds of RBL investors wrote a letter to the judge last summer, asking that their money be returned as soon as possible. The RBL scheme had plunged them into “a deep social, economic, and financial mess,” the letter said.

“We trusted RBL because it was presented as a secure investment opportunity,” the investors wrote. “We invested because we were seeking to contribute to our community while creating a better future for ourselves and our children.”