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 Ohio, advance fee frauds are illegal and are considered a form of white-collar crime. These schemes violate both state and federal laws. Under Ohio law, specifically the Ohio Revised Code (ORC), such activities may fall under the purview of theft by deception (ORC 2913.02), telecommunications fraud (ORC 2913.05), or securities fraud (ORC 1707.44), depending on the specifics of the scheme. Perpetrators can face serious penalties, including fines and imprisonment. At the federal level, advance fee frauds can be prosecuted under various statutes, including mail fraud, wire fraud, and securities fraud, which are governed by the U.S. Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC). The SEC also provides regulations to protect investors from such schemes under the Securities Act of 1933 and the Securities Exchange Act of 1934. Victims of advance fee frauds in Ohio are encouraged to report the crime to local law enforcement, the Ohio Division of Securities, or the SEC.