Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Participants in alleged credit card laundering scheme settle FTC charges, (Dec 22, 2015)

By Linda O’Brien, J.D., LL.M.

A telemarketing company and its two founders that participated in an alleged credit card laundering scheme have agreed to settle FTC charges that they illegally provided access to payment networks, thereby enabling scammers to place bogus charges on consumers’ credit cards, the agency announced today.

According to the FTC complaint (FTC v. PayBasics, Inc., File No. 152-3165), PayBasics and company officers and founders Todd Hatch and Jimmy Shin helped the defendants behind the Tax Club fraud to open and maintain merchant accounts used to process credit card payments for sales made by a number of different third-party scammers. The defendants in the Tax Club work at home scheme settled the FTC charges in June 2014.

The FTC’s complaint alleges that the PayBasics defendants took an active role in helping to maintain Tax Club’s alleged credit card laundering scheme. From 2010 to 2013, more than $1 million in payments from consumers’ credit cards allegedly was laundered through accounts that the defendants helped secure. The defendants collected fees based on the amount of transactions flowing through these accounts.

In some cases, the PayBasics defendants personally vouched for the shell companies behind the bogus merchant accounts, so that the merchant accounts would be approved, according to the complaint. Credit card laundering or assisting someone launder are violations of the Telemarketing Sales Rule, according to the FTC.

Under the terms of proposed stipulated order, the PayBasics defendants are prohibited from acting as a payment processor or contracting with a payment processor to provide payment processing services to a merchant. In addition, they are prohibited from acting as sales agents for high-risk clients in need of payment processing. The proposed order also contains a monetary judgment against the defendants of $1.02 million, which is suspended due to the defendants’ inability to pay. To partially satisfy the judgment, Shin and Hatch will be required to sell two vehicles and turn over any proceeds of those sales that exceed $5,000.

The complaint and proposed stipulated order were filed in the U.S. District Court for the Northern District of Illinois.

“Our investigation didn’t stop with the scammers who took people’s money,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re also shutting down the operators who processed and hid their shady transactions.”

Companies: PayBasics, Inc.

News: ConsumerProtection FederalTradeCommissionNews