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FTC Cracks Down On Online Payment Scam

Court freezes scammers assets

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At the request of the Federal Trade Commission, a federal court has halted an online scam that used identity theft to place more than $10 million in bogus charges on consumers’ credit and debit cards, pending a trial.

More than a million consumers were hit with one-time charges of $10 or less, and their payments were routed through dummy corporations in the United States to bank accounts in Eastern Europe and Central Asia.

The defendants, using fake company names similar to real names and information taken from identity theft victims in the United States, opened more than 100 merchant accounts with companies that process charges to consumers’ credit and debit card accounts, according to the FTC complaint. The FTC believes the defendants may have run credit checks on the identity theft victims first, to be sure they were creditworthy.

FTC-ID-Theft The defendants also cloaked each fake merchant with a virtual office address near a real merchant’s location, a phone number, a home phone number for the "owner," a Web site pretending to sell products, a toll-free number consumers could call, and a real company’s tax number found on the Internet.

The FTC alleged that with spam e-mail, the defendants recruited at least 14 "money mules" – people in the United States they paid to form 16 dummy corporations, open associated bank accounts to receive the card payments, and transfer the money overseas. The defendants used debit cards linked to these bank accounts to set up telephone service, virtual addresses, and Web sites that helped deceive the card processors, according to the complaint.

The "money mules" responded to spam e-mail pretending to seek a U.S. finance manager for an international financial services company. The FTC has not determined how the defendants obtained the stolen identities or consumers’ credit and debit account numbers. Consumers’ payments were sent to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan.

None of the consumers affected by the scam had contact with any of the defendants. Most consumers either didn’t notice the charges on their bills or didn’t seek chargebacks because of the small amounts – charges ranged from 20 cents to $10. Consumers who called the toll-free numbers that appeared on their bills either found them disconnected or heard recorded messages instructing them to leave a message, but no calls were returned.

The defendants are the 16 sham companies – API Trade LLC, ARA Auto Parts Trading LLC, Bend Transfer Services LLC, B-Texas European LLC, CBTC LLC, CMG Global LLC, Confident Incorporation, HDPL Trade LLC, Hometown Homebuyers LLC, IAS Group LLC, IHC Trade LLC, MZ Services LLC, New World Enterprizes LLC, Parts Imports LLC, SMI Imports LLC, SVT Services LLC – and one or more persons who are unknown to the agency at this time. The FTC charged them with making unauthorized charges to consumers’ credit cards in violation of Section 5 of the FTC Act. The court froze the defendants’ assets and ordered them to stop operating, pending final resolution of the case.

 

FTC Cracks Down On Online Payment Scam
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  • Joyce

    Hi,
    I own an art gallery and have a wesite. I have been approched by several e-mails in
    an elaborate scheme. They live in a foreign country wishing to buy art. One lived in Singapore,
    it was difficult to get his mail on his island. So he had a transport company in England which
    would personally pick up our art in the U.S.A., and personally deliver the art to Mr. jay Lord
    in Singapore. He would pay for the art and shipping, but we had to send $1600.00 to
    the shipping company first and then we could charge his credit card. The cash was
    to be sent cash by Western Union…. There was the scam……

    We have been approached by another gent from Australia and several more.

    I believe all e-mails could be local but can ot get the phone company to check this out. We no longer answer the e-mails. We could be loosing sales, but better than loosing art.
    Joyce