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Caleb Newquist: What is an advance fee scam? It's actually a quite common form of fraud that has been around for quite a long time. It involves a scheme where its marks are promised a large benefit things like an inheritance, lottery winnings, investment returns, even lucrative jobs in exchange for a payment up front. If the victim makes this initial payment, sometimes the fraudster will invent further reasons for additional fees to be [00:00:30] paid or they simply disappear. Now, you've probably heard of something like this. I'm guessing you've heard of something like this. It comes in many different forms, and as I mentioned, it's one of the most enduring types of fraud out there. Why? Because it works. These schemes have worked for centuries and they continue to work to this very day.

Earmark CPE: Are you an accountant with a continuing education [00:01:00] requirement, you can earn free Nasba approved CPE for listening to this episode. Just visit earmarked in your web browser, take a short quiz and get your certificate.

Caleb Newquist: Hello and welcome to Oh My Fraud, a true crime podcast where the return on investment is despair. I'm Caleb Newquist. How's it going? Um, I don't know when you're listening to this, but I'm recording in mid-April and it's snowing outside. [00:01:30] They canceled a baseball game yesterday. They canceled a concert at Red rocks, which is an outdoor venue here. Uh, it's postponed or whatever, so I'm not sure where you are, but this is this is becoming typical in Colorado. That is snow in April, and I kind of hate it. And that's really all I've got. So anyway, I just, you know, we're gonna we're gonna get we're gonna get to the episode real quick this time. Um, Uh, quickly [00:02:00] listener mail. Um, we'll do one of those and then some reviews, because that's what we do. All right. I just wanted to send you a big thank you from an accounting student. I can spend time listening to your podcast guilt free when I'm not studying. I'm sure as soon as I become a CPA in the next couple years, I'll be looking to you for that sweet, sweet CPE keep the good fraud stories coming, Hannah. Thanks, Hannah, that you've got the earmark people to thank for that. Um, so. [00:02:30] Yeah, look for Hannah coming through. Earmark people. She'll be getting CPE very soon. Yeah, the accounting students I've actually I've actually spoken. I don't think I'm. I don't think I mentioned this before, but I did a little guest lecture at the University of Denver, uh, in their forensic accounting class earlier in the year.

Caleb Newquist: And that was really fun. The students were really engaged and they asked great questions. And so, uh, this is not me kind of putting myself out there for guest lectures at [00:03:00] for your class, whether it's accounting, law or whatever. But I would do that actually. It was quite fun anyway. Okay, now a few reviews. These are from the earmark app. These were left on the Jonathan Schwartz interview, episode 81. He was Alanis Morissette's business manager. It was a really great conversation, so definitely check it out. Uh, but yeah, I had some nice reviews there. Abigail writes great podcast, really insightful and such great perspective. Patrick great presentation. [00:03:30] Yeah, there wasn't a not much of a presentation. There was no slide deck. There was no PowerPoint. But thanks. Thanks, Patrick. Um, Laurel love hearing from the fraudster and how and why they did it. I think, you know, this is our second, uh, perpetrator on the podcast. And I have to say that they are they are fascinating, uh, stories to hear it directly from those perps. And so I felt really fortunate to have Jonathan on. [00:04:00] And like I said in that conversation, just really grateful to him for sharing his story and being vulnerable about it. Theresa, very interesting first hand account.

Caleb Newquist: Can't wait to read the book. And finally, Missy. Awesome. You rock. Thanks for making CPE remotely interesting. Yeah, sure, that's what we do. So anyway, uh, thanks to everyone who rates or reviews the show on Apple, Spotify, or wherever you do that. Um, speaking of reviews on Apple, uh, [00:04:30] my producer Zach just reminded me that there is a comment near the one of the more recent reviews is complaining about the language and that and he is incredibly pissed off about it. And so do I. I'm I'm putting I'm pleading with the audience, someone just read, uh, excuse me, write a review for Apple. So that gets pushed down into, you know, into the ether, because Zach [00:05:00] is, uh, Zach's kind of losing it, and I. And I don't want him to lose it, I need him. He's my producer, I need him. So, anyway, do me a favor. You know, people leave some Apple reviews, write some, write some nice reviews, and don't mention the language. Okay. All right. Thanks. Um. Email me. You can also email me if you got feedback or episode ideas or whatever. Oh my. Fraud@cpe.com man drinking coffee today and I normally don't for the recordings and [00:05:30] I'm a little a little wired but that's okay. Also, that reminds me, I'm glad I remembered, uh, Greg Kite and I new Jersey society of CPA Convention and Expo, Atlantic City, June 5th, Borgata Hotel I'm not speaking in complete sentences right now, but that is all the details that you need.

Caleb Newquist: If you want to see Greg and I in new Jersey at that show, you can register at the link in the show notes. Also, if you are in need of a presentation [00:06:00] and you're not new Jersey because they've got us up. Email me at o fraud com to get more info on pricing and availability. See if we can work something out because they're fun. All right, that's enough business time for some fraud. The history of advanced fee schemes goes back to at least the 19th [00:06:30] century, with what was known as the Spanish prisoner scam. A New York Times article dated March 20th, 1898 reports that the scheme had been in operation for more than 30 years, and that original form businessmen were contacted via letter by a person who was trying to smuggle someone out of a Spanish prison, who, it was claimed, was a political prisoner related to the Spanish American War of 1898. [00:07:00] The receiver of the letter, the mark, if you like, was asked to contribute money to bribe the guards at the prison with the promise that they would receive a share of a large award. The prisoner was almost always someone of significant wealth, or had access to a hidden or forgotten treasure. There were usually other elements to the scam to make it seem more plausible and enticing.

Caleb Newquist: For starters, the prisoner was using a false identity [00:07:30] and as I mentioned, sometimes the treasure was a secret, so keeping the situation quiet was very important. In some variations, the prisoner claimed to be a distant relative. In others, along with the monetary reward, the additional reward of marrying an unwed woman who was the prisoner's daughter was also offered. In the times article, it tells of one letter that came to the attention of Anthony Comstock, the president of the society for the Prevention of Crime. It [00:08:00] reads, quote. On February 21st, Mr. Comstock, having secured one of these letters signed by X Captain Juan Basanta of Barcelona, Spain, had a fraud notice issued against the address and wrote The Barcelona postmaster, who replied in his innocent foreign way that he believed ex Captain Basanta to be a humbug and a robber. The captain seems to have been promptly informed of what had been done, for he immediately made changes [00:08:30] in his name and tactics. The Spanish prisoner con was very similar to a pigeon drop scheme that also goes back to at least the 18th century. In a pigeon drop, there are multiple con artists involved, with one finding a valuable item, sometimes a ring or a wallet filled with money and approaches. The fraudster approaches the mark or pigeon to see if the item is theirs. Then another stranger comes [00:09:00] by posing as a trusted person, like a lawyer or a banker, or someone else with a top hat.

Caleb Newquist: They propose that they can legitimately keep the item and split its value amongst the three of them, so long as they all provide some financial security. First, the non-lawyer banker fraudster will quickly and enthusiastically hand over some money and encourage the mark to do the same. Then the two fraudsters will come up with an excuse [00:09:30] to rush off, leaving the mark with the valuable, which they soon learn is either worthless or has been swapped with some kind of decoy. The one example that happens a lot is especially if it's with money, is the decoy ends up being a bunch of shredded paper that was supposedly filled with all the money they make off with the money that they had put into a bag, and they somehow do a switch, do the old switcheroo. And, uh, yeah, the mark is left with a bag of worthless paper. Pigeon [00:10:00] drops have been depicted numerous times in TV and movies, including the movie Matchstick Men and television shows uh, The Jeffersons, The Golden Girls and, uh, an old movie, uh, The Sting with, uh, Robert Robert Redford and Paul Newman. There's yet another variant of the advance fee scheme that dates back to the 18th or 19th century, called The Letter to Jerusalem. The father of modern criminology, Eugene Francois Vidocq, [00:10:30] described these letters in his memoirs, which he had seen in prison.

Caleb Newquist: Yes. Just to clarify, uh, the father of criminology was a criminal. Don't be surprised. Anyway, versions of this scam continued for decades, with the modern form dating back to Germany in the early 20th century. It picked up steam again in the 1980s, but then, with the advent of the internet, along with the spread of email [00:11:00] and email harvesting software, running these scams got very, very easy and inexpensive. I personally remember them being kind of hilariously formal. Something that sounds like this. Sir, you will doubtlessly be astonished at receiving a letter from a person unknown to you that may sound familiar to you. The funny thing about that is that is the opening of a letter in Eugene Francois [00:11:30] Vidocq memoirs. So the language hasn't even changed that much. Now, if you remember receiving these emails, you probably also remember them coming from a couple of different senders. One, a director at the Nigerian National Petroleum Corporation. In this case, it usually involves something like a hidden, unspent budget that the director was trying to transfer out of the country. And if you, the recipient, who they knew to be trustworthy [00:12:00] and of upstanding moral character, you would receive 30% of the funds if you could just help them, or you would get it from a Nigerian prince or other member of a royal family in some kind of similar, you know, situation, trying to get money out of the country.

Caleb Newquist: Yes, the Nigerian prince emails. These are also sometimes known as A419 scam, so named because that is the section number in the Nigerian Criminal code that deals [00:12:30] with fraud. These have become infamous to the point of parody. There are memes of course, and for online scams serve as the basis of episodes of shows like Futurama and Family Guy. In our recent bonus episode about the movie The Informant that Zack and I discussed the main character, Mark Whitacre. He started stealing from his employer, allegedly because he had been taken in one of these Nigerian prince scams. But [00:13:00] these have also been the basis of many unfunny movies and TV shows because, as I said, these schemes work and the results can be devastating. As the internet has evolved, these scams have as well. These days they can involve cryptocurrencies, inheritances, online romance, bogus job offers, lottery winnings, even pets. Despite [00:13:30] advanced fee schemes being around for centuries, all the versions have a couple of key things in common one. Irreversible transactions two. Anonymous communication impersonation via letters, email, fax, text messages, social media DMs Regardless of what form they take. It just seems crazy that they work right. They all seem completely implausible, downright silly. But as I've already said a couple of times, they work [00:14:00] and it's clear that they work because people keep using the methods. But why do they work? On the surface, the absurdity of some advance fee scams make it difficult for most of us to believe that anyone could fall for them.

Caleb Newquist: But the truth is, these are very sophisticated schemes that manipulate its victims through the exploitation of their emotions, building a false sense of trust, leveraging cognitive biases and more. First, [00:14:30] let's look at the manipulation and exploitation of emotions. There are a few things going on here, some obvious and some not so obvious. Let's start with the obvious. Victims are being given an opportunity for a large gain of some kind, whether it's an inheritance, hidden treasure or no name Prince, trying to sneak his well-deserved fortune out of the clutches of some warlords. The chance for financial security can prove to be irresistible for some people in American society [00:15:00] especially, we are bombarded with marketing that portrays wealth and financial security as a virtue that we all hope to achieve. If only the right opportunity comes along. Wait, is this down on his luck? Prince? My opportunity. Okay, now for the not so obvious. There's usually a fear and urgency to these opportunities that require the victims to act quickly so as not to miss out on a rare opportunity. This [00:15:30] helps push them toward making a decision without taking the time to look into it, or to talk to someone they trust. Also, in some variations, a romance scam is a good example.

Caleb Newquist: Fraudsters evoke empathy and compassion from their victims by sharing made up personal struggles. This emotional connection clouds judgment and encourages impulsive action. It's like a much more sinister version of Sarah McLachlan's Angel being played in those animal cruelty commercials. By [00:16:00] the end of it, you're screaming, take my money, take it! You must take it all. Some of us can't resist. Then there's the element of trust in these scams. Fraudsters portray themselves as authority figures from reputable organizations who build an emotional bond with their frequent and friendly communication. This is most common in romance scams. By securing small payments and demonstrating falsely the good the money is doing, victims [00:16:30] can feel more obligated to provide more and larger amounts of money. Finally, there are the cognitive biases at play. As we discussed earlier, these scams are often presented as rare opportunities. If you don't act now, you might miss out. And that fear, the fear of missing out, or FOMO if you like, is a powerful thing. It drives hasty decisions, which is precisely what the perpetrators of the scams want. Then [00:17:00] there's the sunk cost fallacy. Many of you are familiar with this idea. It occurs when a person is reluctant to abandon a situation because of the time, money, or other resources that they've put into it, even when it's clear that stopping is the best course of action. In the case of these advanced fee scams, victims hope that some way, somehow the next payment will result in the final big reward making up for everything that's been invested so far.

Caleb Newquist: But [00:17:30] that reward never comes. And the final cognitive bias that is a factor in these advanced fee scams is one. We've talked about the overconfidence effect. Some victims believe that they are too smart to be taken in by a scam, or they believe that they are smart enough to somehow outsmart the scammer. Greg Kite and I discussed this idea and much more with psychologist Dan Simons and Chris Chabris in episode 60. It's the belief [00:18:00] in our subjective confidence that our own intelligence, business savvy, or instincts is higher than our objective accuracy of our judgment in a given situation. In this context, some victims might believe that they're just too smart to fall for a scam, making them even more susceptible to being fooled. There are other factors at play, too the need for secrecy, the use of partial truths by the scammer, as [00:18:30] well as the shame and denial of being fooled. It all adds up to a complex psychological mix that makes some people the perfect marks for these seemingly simple scams. Remember, perpetrators are sending these messages to millions of people. They only need a small number of them to take the bait to make the efforts pay off. Okay, let's look [00:19:00] at a couple case studies. Case number one.

Caleb Newquist: Don't look a gift horse in the mouth. Opportunistic is the word that most aptly describes you. That's what Judge Dora Irizarry of the Eastern District of New York said of 67 year old William C Lang at his sentencing in March 2015. He had just pleaded guilty to two counts of conspiracy to commit wire fraud and conspiracy to commit securities fraud and wire fraud the [00:19:30] previous September. Lang had spent the prior decade defrauding 300 investors out of $10 million through his companies, the Harbor Funding Group and Black Sand Mine Incorporated. Raided. In the case of harbor funding Group, Lang was defrauding real estate developers and their clients, who were attempting to rebuild areas devastated by Hurricane Katrina in 2005. Lang claimed that harbor funding had relationships with lenders and millions [00:20:00] of dollars available to finance these real estate projects. As a condition for the financing, he required the investors to put 10% of the loan amounts in an escrow account. Turns out harbor funding did not have relationships with lenders or millions of dollars in financing. Just as soon as the money hit the escrow account, Lang and his coconspirators ran off with it. All told, they took over $9 million. Lang [00:20:30] spent the money on fishing and hunting trips for him and his son, who was one of his coconspirators. He remodeled and landscaped his new house. He bought Harley-Davidson motorcycles and then other business ventures. One of these business ventures was Black Sand Mine Incorporated, which wasn't really an advance fee scheme, so much so as it was a good old, you know, investment scam.

Caleb Newquist: A March 13th, 2015 Department of Justice press release stated, quote, through the [00:21:00] use of in-person presentations, cold calls and webinars which they put in quotation marks, for some reason, Laing and his coconspirators convinced investors to purchase black sand mine stock by lying to them about the credentials of the company's officers and directors. Black sand mined assets and liabilities, the intended use of investor funds, and by concealing their prior involvement in harbor funding. Now, [00:21:30] I just want to stop here to inform you that the line about the credentials of the company's officers and directors included Lang's son, Christopher Lang, who they were holding out as a quote unquote mining expert. But according to a report in the New York Times, at his own trial on fraud charges, when Christopher Lang was asked about how gold was mined and processed, this is how he responded. It's a system [00:22:00] that flows. Dump the materials into one thing and it funnels into another thing, and then it goes into another thing and it comes out into another thing. I don't know if he's describing gold mining or like a smoothie machine or maybe the line at the DMV. And while I love that so much, probably the best part of the story, or at least the most satisfying part of the story, also came out during Christopher Lang's trial. [00:22:30]

Caleb Newquist: It was there that everyone learned that William Lang, serial fraudster who had fooled hundreds of people into losing millions of dollars, was himself fooled into losing millions of dollars. He fell for a pitch where he could make millions via an exclusive trading platform. But yes. Wait, he had to put some money up front in order to get access. He fell for [00:23:00] a scam like this. Not once, not twice, but three. Yes. Three times. He lost almost half of the money that he had stolen. This way. William Lang was sentenced to 22 years in prison in March 2015, according to federal prison records. He died in January 2025. Case study number two. Dm [00:23:30] for opportunity. On December 10th, 2024, the Nigerian Economic and Financial Crimes Commission raided a seven storey building in Lagos that housed a huge cybercrime operation, also known as a Hustle kingdom. Nearly 800 people were detained, including 148 Chinese, 40 Filipinos and a handful of other Non-nigerians. The raid occurred after months of surveillance [00:24:00] and intelligence work. The commission stated that foreign organizers recruited Nigerians and trained them on the methods to perpetrate various cyber scams, including investment, romance and crypto schemes, many of which are variations on advance fee schemes. The victims were virtually all from North America and Europe, contacted through direct messages on WhatsApp, Instagram and other social media platforms.

Caleb Newquist: The chairman of the commission said that organized crime from outside of Nigeria, quote, take advantage [00:24:30] of our nation's unfortunate reputation as a haven of frauds to establish a foothold here to disguise their atrocious criminal enterprises. Ripples Nigeria, an independent investigative online news platform based in Lagos, has pictures from the raid and that link is in the show notes. And there is one of literally hundreds of people sitting on the ground and others of inside the building with rows and rows of workstations. Officials have stated that Nigeria [00:25:00] offers very few employment opportunities, so anyone who has useful computer skills is useful to organizers of these scams because they can get them to perpetrate the scams and they can pay them a living wage. Once the Nigerian accomplices would get the marks on the hook, the organizers of the schemes would take over to do the actual defrauding of the victims. The accomplices were often paid in cash or in some other means. That was difficult to trace back [00:25:30] to the organizers of the operation. The Financial Crimes Commission said that better employment opportunities, as well as international cooperation are needed to help combat the recruiting of people into the criminal enterprises. Sadly, these types of law enforcement successes are rare because these scams are international. There are a myriad of jurisdictional issues involved. Furthermore, as the use of digital payments have become widespread, the anonymity and irreversibility afforded [00:26:00] by some of these methods have made tracking the money incredibly difficult, almost impossible.

Caleb Newquist: So what did we learn? Everything you'd want to know about advanced fee scams, right? Hopefully beyond that, I think there are a couple of things that we can take away from these advanced fee scams. First, how can you spot these in the wild? Because, you know, it's highly unlikely that [00:26:30] you're going to be tipped off by clunky English or typos. These days, you can reasonably expect scammers to use deepfakes, clone voices, and other AI tools to help perpetrate these scams. These tools can be used to make the scams incredibly convincing. I just created one right before I wrote that last sentence. I prompted ChatGPT to write me one. Here's the opening paragraph. I hope this message finds you well. My [00:27:00] name is David Mercer and I'm reaching out on behalf of Aquila Capital Holdings, a private investment group based in London with a mandate to deploy capital into high growth ventures and alternative asset classes in North America. Pretty good right? Now, here are the two paragraphs that make the ask. The opportunity involves secured international bond trading and has generated consistent returns in the range of 18 to 24% quarterly for qualified participants. It's backed [00:27:30] by tier one banking partners, with all transactions occurring under International Chamber of Commerce protocols. To move forward Compliance and onboarding documents must be filed within three business days.

Caleb Newquist: There is a refundable administrative hold of 12,500 USD which covers legal verification and contract issuance. This is standard in order to ensure good faith prior to fund commitment. It's a lot of gibberish, but it's very convincing gibberish. So. How could you? How could [00:28:00] anyone? Yes, anyone. What can you do to be sure that you don't fall for something like that? And the thing that I immediately think of is if it sounds too good to be true, it probably is. And I don't know if there's a golden rule for being able to spot fraud, but that's probably as close as it's going to get. Like, does a stranger, someone you've never met, just straight up offer you a large sum of money [00:28:30] if you help them with something seemingly simple and harmless that also requires you to send them money first. No, they do not. That does not happen in good faith transactions. It is too good to be true. More practically, no organization asks for money up front for something that you've won. Not an inheritance, not a job, not a hidden treasure, not a government grant that you didn't apply for that was [00:29:00] addressed to you from a weird Gmail account at 3:00 in the morning. Second, the longevity of advanced fee scams. Remember, these have been going on for centuries is due to the imagination of fraudsters who perpetrate them. They know that human beings don't change.

Caleb Newquist: They prey on our emotions, the sympathy that we can have for someone in trouble, or the fear of missing out on a rare opportunity or the comfort of financial security. They they [00:29:30] use those to their advantage to find victims. So if you're immune to all that stuff, Then congratulations. You're probably a wealthy sociopath. I think the final thing to remember is something we discussed in episode 64, which was about a pig butchering scam. And that is, organized crime often exploits people who need to earn money in order to live by helping carry out these crimes, especially in the digital [00:30:00] age. I imagine that it's very tempting for some people to respond to these messages with the middle finger or, you know, something far worse than that. This American Life had a segment in one of their episodes from many years ago about internet vigilantes who would lead these 419 scammers astray. The thinking, you know, their thinking was that the longer you keep these fraudsters on a wild goose chase, that's time [00:30:30] spent that they won't be scamming other people. For the most part, the pranks they would pull on these fraudsters were harmless. Nothing worse than, you know, a bad tattoo. But in that This American Life episode, they do document a case where they convince one fraudster to travel long distances to very dangerous areas of Nigeria and also the neighboring country, Chad, where this guy doesn't speak the language at all.

Caleb Newquist: This this podcast is over a decade old, so I'm so, so I'm sorry [00:31:00] that I'm not sorry if I spoil this for you, but the vigilantes, these 419 vigilantes, they put this fraudster in some very dangerous situations. So much so that there they were all speculating that he and the other man he was traveling with might end up being killed, and the vigilantes were pretty indifferent about it. Some even seemed gleeful about the possibility that this guy would end up dead. The good news is he wasn't killed. The [00:31:30] bad news is he went back to committing fraud. Okay, that's it for this episode. And remember, if someone slides into your DMs and winds up asking for money, find out why they're not asking for sex. If you have questions, comments, or suggestions for stories, drop me a line at my fraud at earmarks. Com or hit me up on LinkedIn or my fraud is created, written, produced and hosted by me. [00:32:00] Caleb Newquist Zach Frank is my co producer, audio engineer, and music supervisor. Laura Hobbs designed our logo. Rate review and subscribe to the show wherever you listen to podcasts. First one to get one on Apple. You're going to be Zach's hero. If you listen, on your mark, get some CPU while you're there. Join us next time for more avarice, swindlers and scams from stories that will make you say, oh my fraud.