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 Rhode Island, advance fee frauds are illegal and are considered a form of white-collar crime. These schemes violate both state and federal laws, particularly when they involve securities fraud or wire fraud. Under Rhode Island General Laws, such fraudulent activities can be prosecuted under various statutes including theft by deception and obtaining property by false pretenses. Additionally, the Rhode Island Uniform Securities Act provides specific regulations against securities fraud, which would cover some forms of advance fee schemes involving investment opportunities. At the federal level, the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) may also pursue actions against individuals or entities conducting advance fee frauds. Victims of such schemes are encouraged to report the fraud to the Rhode Island Attorney General's office, the SEC, or the FTC. It is important for investors to conduct due diligence and be wary of any requirement to pay upfront fees for financial services or investment opportunities.