Advance fee frauds ask investors to pay a fee up front—in advance of receiving any proceeds, money, stock, or warrants—in order for the deal to go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later.

Some advance fee schemes target investors who already purchased underperforming securities and will offer to sell those securities if an advance fee is paid—or target investors who have already lost money in investment schemes. Fraudsters often direct investors to wire advance fees to escrow agents or lawyers to give investors comfort and to lend an air of legitimacy to their schemes. Fraudsters may also try to fool investors with official-sounding websites and e-mail addresses.

Advance fee frauds may involve the sale of products or services, the offering of investments, lottery winnings, found money, or many other so-called opportunities. Fraudsters carrying out advance fee schemes may:

• Offer common financial instruments such as bank guarantees, old government or corporate bonds, medium or long term notes, stand-by letters of credit, blocked funds programs, fresh cut or seasoned paper, and proofs of funds;

• Offer to find financing arrangements for clients who pay a finder’s fee in advance; or

• Pose as legitimate U.S. brokers or firms and offer to help investors recover their stock market losses by exchanging worthless stock—but requiring investors to pay an upfront security deposit or post an insurance or performance bond.

In Connecticut, advance fee frauds are illegal and are considered a form of financial fraud or scam. These schemes violate various state statutes that prohibit deceptive business practices and fraud. Specifically, the Connecticut Unfair Trade Practices Act (CUTPA) prohibits deceptive acts or practices in the conduct of any trade or commerce. Additionally, the Connecticut Securities, Commodities, and Investor Fraud Act addresses fraud related to securities and investments, making it illegal to defraud or mislead investors. Victims of advance fee frauds in Connecticut can file a complaint with the Connecticut Department of Banking, which regulates securities and can take action against individuals or entities engaging in such fraudulent activities. Furthermore, federal laws such as the Federal Trade Commission Act and various securities laws enforced by the Securities and Exchange Commission (SEC) also provide protection against advance fee schemes. It is advisable for individuals approached with such offers to exercise caution and consult with an attorney before making any payments or investments.