Enforcement News: Affinity Fraud and Ponzi Schemes Never Get Old

• Posted on: Feb 9 2026

By: Jeffrey M. Haber

As readers of this Blog know, affinity fraud and Ponzi schemes often intersect because each reinforces the weaknesses of the other, creating a powerful and deceptive form of financial exploitation.[1]

Affinity fraud is a form of financial deception that exploits the trust and social cohesion within a close‑knit group. These groups may be defined by shared religious beliefs, cultural or ethnic identity, professional affiliations, or community networks. The fraud typically begins when an individual – often someone who appears to be a respected or long‑standing member of the community – presents an investment or financial opportunity that seems credible precisely because it comes from a familiar source.

The perpetrator leverages the group’s internal bonds to build legitimacy, frequently encouraging early participants to recommend the opportunity to others. Because recommendations circulate through trusted personal relationships, skepticism is limited, and formal due diligence is often bypassed. The fraudster may reinforce the illusion of success by reporting fictious returns or by making small initial payments to early investors, thereby strengthening confidence in the scheme.

As the fraud spreads within the group, participants invest not only their financial resources but also their interpersonal trust. Eventually, however, the scheme collapses – often when it becomes impossible to attract additional funds. The resulting losses extend beyond financial harm. Communities experience strained relationships, diminished trust, and, in some cases, long‑lasting reputational damage.

In essence, affinity fraud is particularly pernicious because it preys not on financial naïveté alone, but on trust – that is, trust with those on whom people share an identity, values, or history.

A Ponzi scheme typically begins with an investment enterprise that purports to offer unusually stable and inflated returns. The promoter, who often embodies a veneer of expertise and professional legitimacy, positions the investment as a “can’t lose” opportunity. The investment strategy is often framed in abstract or proprietary terms, discouraging scrutiny while appealing to individuals who fear missing out on access to high‑yield financial vehicles.

In its early stages, the scheme functions as represented, primarily because its obligations remain limited. Initial investors receive the returns they were promised, not through legitimate asset appreciation, but through the redirection of funds supplied by newly recruited participants. These early “returns” and payments play a critical role: they serve as evidence of the promoter’s competence and create validation. Investors often respond by increasing their contributions or by introducing additional participants, amplifying the scheme’s growth through emergent network effects rather than through genuine investment performance.

Over time, the fragility of the scheme becomes increasingly pronounced. Because it lacks a legitimate economic foundation, its survival depends entirely on the continuous and accelerating inflow of capital. Even minor disruptions, such as the slowdown in recruitment, an increase in withdrawal requests, or the emergence of external regulatory attention, can destabilize the scheme. Once incoming funds no longer exceed or at least match outgoing obligations, the scheme’s financial obligations become unsustainable. The collapse is typically abrupt: promised payments cease, liquidity evaporates, and the underlying deception comes to light.

The aftermath of a Ponzi scheme extends beyond financial loss. Victims frequently report long‑term erosion of trust in financial intermediaries, regulatory institutions, and social networks associated with the promoter. For many, the most acute harm arises not merely from monetary depletion but from the psychological dissonance created by having relied on assurances that, in retrospect, appear implausible.

In today’s article, we examine SEC v. Likhtenstein, Case No. 1:25-cv-05412 (E.D.N.Y.), an enforcement action that the SEC brought against Marat Likhtenstein (“Defendant”) for perpetrating a Ponzi-like scheme primarily targeting the Russian American Jewish community.

According to the SEC, from at least April 2017 through June 2024, Defendant, while acting as an investment adviser, solicited, recommended, and sold self-issued investments in the form of promissory notes that raised more than $4.1 million from at least 15 advisory clients. The SEC alleged that Defendant falsely told his clients, many of whom were elderly,[2] that if they purchased promissory notes from him through his “side business,” they would earn extraordinary interest rates through investments in highly lucrative business opportunities and deals. However, said the SEC, Defendant did not actually invest the investors’ funds. Instead, he allegedly misappropriated their funds by making $940,000 in Ponzi-like payments to other investors and by spending almost $3.2 million on his personal expenses.

The SEC filed its complaint in the U.S. District Court for the Eastern District of New York. The SEC charged Defendant with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC sought a final judgment ordering Defendant to pay disgorgement, prejudgment interest, and civil penalties, as well as enjoining him from violating the charged provisions and imposing conduct-based injunctions.

Defendant, without admitting or denying the allegations, consented to a bifurcated settlement, agreeing to the injunctive relief, with monetary relief to be determined at a later date. On February 4, 2026, the Court entered the consent judgment.[3]

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

[1] Previously, we examined SEC enforcement actions involving affinity fraud and Ponzi schemes in numerous articles, including: Enforcement News: SEC Brings Emergency Action Against Alleged Perpetrators of an Affinity Fraud and a Ponzi Scheme; Enforcement News: The Intersection of Affinity Fraud and a Ponzi Scheme; Enforcement News: A Double Shot of Ponzi Schemes with a Dose of Affinity Fraud; Enforcement News: SEC Files Complaint in Connection with a $300 Million Ponzi Scheme and Affinity Fraud; and Enforcement News: Affinity Fraud and Ponzi Schemes in the News Again.

[2] This Blog has examined financial elder abuse on numerous occasions. See, e.g.,  SEC Receives Temporary Restraining to Halt the Financial Exploitation and Abuse of Seniors, and Enforcement News: Ponzi-Like Scheme, Elder Financial Exploitation and Affinity Fraud. To find the articles related to financial elder abuse or financial exploitation of seniors, visit the “Blog” tile on our website and enter “financial elder abuse” in the “search” box.

[3] ECF Dkt. No. 8.

Tagged with: Affinity Fraud, Ponzi Scheme, SEC, SEC Enforcement Actions, Securities, Securities Act of 1933, Securities and Exchange Act, Securities Fraud