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 Utah, advance fee frauds are considered illegal and are addressed under various state statutes and federal laws that prohibit fraudulent activities and deceptive business practices. The Utah Division of Securities within the Department of Commerce is responsible for enforcing securities laws and protecting investors from fraud. Under Utah Code, particularly the Utah Uniform Securities Act, it is unlawful for any person to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the offer, sale, or purchase of securities. Additionally, advance fee schemes may also violate federal laws enforced by the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC), which target interstate fraud and deceptive practices. Victims of such schemes can report the fraud to the Utah Division of Securities, the SEC, or the FTC. It is advisable for individuals to be cautious of any investment requiring upfront payments and to conduct thorough due diligence before committing funds. An attorney specializing in securities law can provide guidance on specific cases of advance fee fraud.