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 Indiana, advance fee frauds are illegal and are considered a form of white-collar crime. These schemes violate various state statutes and federal laws, particularly those related to fraud and theft. Indiana's Deceptive Consumer Sales Act (IC 24-5-0.5) provides a basis for action against deceptive practices, which would include advance fee schemes. Additionally, the Indiana Securities Division enforces the Indiana Securities Act (IC 23-19), which regulates securities transactions and prohibits fraudulent practices in connection with the offer, sale, or purchase of securities. Federally, the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) also combat advance fee frauds, with the SEC focusing on schemes involving securities and investment, while the FTC addresses broader consumer protection issues. Victims of such frauds in Indiana can report the matter to the Indiana Attorney General's Office, the Indiana Securities Division, or federal agencies like the SEC or FTC. It is advisable for individuals approached with such offers to seek guidance from an attorney before making any payments or investments.