SEC Polices Affinity Fraudsters Despite Enforcement Sea Change

The SEC is quietly cracking down on investment fraud within minority and immigrant communities, carrying on an enforcement priority from previous administrations even as Trump-appointed officials upend many other initiatives.

Hindus in the San Francisco Bay Area, Ismaili Muslims in North Texas, and Nigerian Americans in Milwaukee were among those swindled by schemes preying on their affinity groups in recent years, according to lawsuits filed by the Securities and Exchange Commission in President Donald Trump’s second term.

The regulator has brought at least 10 complaints in the past year alleging defendants ran Ponzi-style schemes and engaged in other efforts to solicit investments from religious, cultural, or ethnic groups, according to a review by Bloomberg Law. That’s roughly in line with the volume of similar cases the SEC brought under the final year of Biden-era Chair Gary Gensler, whose agency took an aggressive stance toward rooting out affinity fraud.

The SEC under Chairman Paul Atkins has been less outspoken about its affinity cases, but they align squarely with his plans to prioritize outright fraud and investor harm, while largely ditching his predecessor’s focus on crypto-related infractions and registration errors.

“This is an administration that has been very vocal about its focus on retail investors, and there are certainly some priorities from one administration to the next that stay evergreen,” said Carolyn Welshhans, a partner at Morgan Lewis and former associate director of the SEC’s enforcement division. “In that respect, affinity fraud is definitely one.”

The SEC declined to comment.

‘Evergreen’ Priority

While the SEC has long warned investors about affinity fraud, the regulator under Biden-era enforcement chief Gurbir Grewal dialed up those efforts, starting a Fraud Against Minority Groups Initiative through its Miami office and going directly into targeted communities with educational outreach.

“You’re talking about someone in a group where people trust them, or they can identify with them. That lays the framework for how these frauds happen,” said Jeffrey Haber, a co-founding partner of Freiberger Haber LLP who focuses on securities law.

The agency’s new enforcement director, Margaret Ryan, hasn’t explicitly mentioned affinity fraud, but she emphasized her boss’s priorities in her first public remarks Feb. 11 at the helm of the division.

“Identifying, rooting out, and remedying scams, particularly those that inflict devastating costs on everyday retail investors, is the cornerstone of what we do,” she said.

While it homes in on bread-and-butter investor fraud, however, the SEC’s cases against powerhouse companies have tumbled.

The SEC initiated 56 actions against public companies and subsidiaries in fiscal 2025, a 30% drop from the previous year, according to Cornerstone Research data. That includes only three actions in the second half of the fiscal year, the lowest semiannual total in the data going back to fiscal 2010.

The regulator hasn’t released its own annual enforcement report for the fiscal year.

Limited Capacity

Public company reporting violations aren’t necessarily on par with fraud and many won’t result in enforcement actions, except in middle-ground cases where compliance failures pose risks to investors, Ryan said in her remarks.

But the SEC’s broader enforcement downturn, amid its renewed focus on simpler cases such as affinity fraud, may also reflect its limited bandwidth. The SEC lost more than 800 employees last year—over 15% of its staff—including through the Trump administration’s buyout and deferred-resignation offers, according to Office of Personnel Management data.

“The SEC as a whole and the Division of Enforcement have seen leadership changes, they’ve also seen a reduction in the number of staff due to buyouts and other offers, and on top of that they’ve had to deal with shutdowns,” Welshhans said.

“They are going to have a fewer number of cases and investigations,” she said. “That’s just reality given the smaller headcount.”

The SEC is still upholding its duty to enforce securities rules, Atkins told the Senate Banking Committee last week, framing the personnel turnover as an opportunity to fill positions with younger staff members.

For now, however, the SEC is likely to continue directing its attention to affinity fraud and other low-hanging fruit, agency watchers said.

“Given the resources and the priorities that the SEC has, these types of frauds are something they can address more readily than larger things,” Haber said.