Fraud, initially legal but horrible (9)
I believe the answer is:
frightful
'horrible' is the definition.
(I know that horrible can be written as frightful)
'fraud initially legal' is the wordplay.
'initially' says to take the initial letters.
'legal' becomes 'rightful' (as in the rightful owner of something).
The first letter of 'fraud' is 'f'.
'f'+'rightful'='FRIGHTFUL'
'but' acts as a link.
(Other definitions for frightful that I've seen before include "Appalling" , "alarm" , "ugly" , "nasty" , "from hell" .)