Friday 31st August 2012
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The Serious Fraud Office is seeing an increase in 'affinity fraud', where people have trusted friends or family with their investments and feel less inclined to put their money in finance companies that have lost the public's trust.
SFO Chief Executive, Adam Feeley gave his warning after Christopher Collecutt pleaded guilty in the Auckland District Court to three charges under the Crimes Act while he trade foreign exchange under the name CFX Trading.
Some 59 investors, mostly family and friends, lost approximately $1.5 million by investing with Collecutt, who "cynically, and effectively, exploited his personal relationships with investors."
"While the finance company collapse may have eroded the public trust in some investment opportunities, it has created a niche market in affinity fraud for those wanting to criminally exploit the trust of their family; friends; work colleagues; or other associates," Feeley said.
Collecutt's charges include theft by person in special relationship, obtaining by deception or causing loss by deception, and false statement by a promoter. The SFO has investigated a variety of cases in the past year where there was some common link between the parties involved, including family, iwi and religious affiliations.
"Social media exacerbates the risk in this area as relationships established through Facebook, LinkedIn and other sites give victims a level of trust and confidence in people proposing investments that is completely disproportionate to their knowledge of that individual," Feeley said.
Trends emerging in New Zealand are also reflected in other economies. The US Federal Bureau of Investigation's last annual report highlighted what it said was "a widespread sentiment in the US that because the financiers of Wall Street, and elsewhere, have proven they can't be trusted, the public are better off investing with those they know," the SFO statement says. "Nothing could be further from the truth."
The SFO began investigating Collecutt in August last year and laid charges in May this year. He is to be sentence on Dec. 14.
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