By: Ryan Corbin , Fall 2014 Student Intern
Just from the name you can likely guess what advance fee fraud is. As you probably guessed, this type of fraud occurs when an investor is asked to pay a fee up front in order for the deal to go through, but then you never see your money again. You’re likely thinking: I would never fall for that! However, just a couple weeks ago the SEC released an Investor Alert due to the thousands of complaints that they have received regarding this type of fraud.
Advance fee fraud may come in many shapes and forms. One type of advance fee fraud that has garnered much attention is the Nigerian Advance Fee Fraud. As you have likely witnessed firsthand, fraudsters pretending to be a Nigerian official or business-person ask for help moving large sums of money out of Nigeria and, in exchange, offer a percentage of this sum for the help. These offers may come through mail, faxes, phone calls, and e-mails. In fact, Nigerian Advance Fee Frauds have gotten so much attention that the U.S. Secret Service has set up a task force for addressing them.
Another version of advance fee fraud may involve a con artist offering to find financial arrangements for their clients who pay a finder’s fee in advance. These clients will sign a contract agreeing to pay the fee when they are introduced to the financing source. After the victims pay the “finder,” they learn that they are ineligible for financing. The list of examples of advance fee fraud goes on and on.
According to the SEC, the “best ways to avoid investment fraud is to ask questions.” Also, be wary of websites and email addresses claiming to be from a U.S. government agency if it does not end in “.gov,” “.mil,” or “fed.us.” If you’re feeling wary about a possible investment, check out FINRA’s Scam Meter by clicking here.