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 Montana, advance fee frauds are considered illegal under both state and federal law. These schemes, where individuals are asked to pay an upfront fee with the promise of receiving a larger amount of money or valuable goods later, often fall under the category of wire fraud, mail fraud, or securities fraud. The Montana Securities Act, administered by the Montana Commissioner of Securities and Insurance, prohibits fraudulent practices in connection with the offer, sale, or purchase of securities, which includes advance fee schemes involving investment opportunities. Additionally, federal laws enforced by agencies such as the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) also target these fraudulent activities. Victims of such schemes are encouraged to report the fraud to local law enforcement, the Montana Commissioner of Securities and Insurance, and federal authorities. It is advisable for individuals to be cautious of any unsolicited investment opportunities requiring upfront payments and to consult with an attorney before proceeding with any such transactions.