The feds call it affinity fraud, preying on members of your own ethnic or religious group. Think Bernie Madoff and the Jewish community, Shawn Merriman and the Mormon community, George Elia and the gay community -- the list is endless, and now includes members of the Lebanese and Druze communities in Houston.
The latest bout of alleged bad behavior is a civil case the Securities and Exchange Commission filed against Firas Hamdan, a member of the Houston-area Lebanese and Druze communities. The SEC says Hamdan raised more than $6 million over the last five years from at least 33 different individual investors.
Those investigators claim Hamdan promised them annual returns of 30% and told members of his community that he would pool their money with his own to conduct high-frequency trading using a proprietary algorithm.
The SEC says Hamdan, “assured his investors that his program was safe and proven when in reality it was a dismal failure, generating $1.5 million in losses.” When Hamdan failed to deliver the profits, he allegedly told his investors that the funds were tied up in the Greek debt crisis and the MF Global bankruptcy.
Roger Yokubaitis, a lawyer who sued Hamdan on behalf of a client and won a $1.89 million judgment, says members of the Lebanese and Druze community in Houston trusted Hamdan because he was president of a local Druze community organization.
Yokubaitis says, “Nobody knows for sure what happened to all the money.” Yokubaitis’s client never got a penny of the judgment and it looks as if Hamdan’s other clients may get very little in the future.
The SEC says Hamdan told investors he had a cash reserve account that secured their investments. Yokubaitis says Hamdan told clients the money was lost, “because he kept the reserve amount of money to pay people off immediately and that reserve amount of money was invested with MF global. That money was lost when they (MF Global) went under.”
Hamdan has not returned calls seeking comment.
Adam Shapiro joined FOX Business Network (FBN) in September 2007 as a New York based reporter.