SEC Charges San Diego Area Man with Affinity Fraud

The Securities and Exchange Commission has brought fraud charges in federal court against a Somali run financial services firm accusing it of targeting local Somalis in a securities fraud scheme. The Commission charged Mohamud Abdi Ahmed and his company, Shidaal Express, Inc., with defrauding investors of over $3,000,000.

The SEC complaint alleges that Ahmed marketed his scheme to Somali investors, promising them returns of 5% monthly with an annual return of 60%. Among the victims of the alleged fraud was a Southern California mosque, which the complaint alleged Ahmed defrauded out of $200,000. As part of the scheme, Ahmed bragged to potential investors that he was an experienced stock trader who had never lost any money.

Allegedly, Ahmed began the scheme in 2006. He apparently operated it as a Ponzi scheme, making payments to investors requesting money until the beginning of last year. The payments presumably came from the monies invested by later victims. When the payments ceased, investors began to complain.

The federal court has frozen the assets of Shidaal and Ahmed. Additionally, the court has appointed a receiver to temporarily administer the firm.

An “affinity” fraud occurs when a confidence artist targets a religious or ethnic group with which he has an affinity. The fraudster has a built in trust with the targeted group and can more easily effect his fraud. The “affinity” fraud may be accomplished by any type of fraud scheme. Most prevalent are Ponzi and pump and dump schemes.

For more about the fraud charges against Ahmed, please see the article from The San Diego Union-Tribune, November 24, 2009.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.