Threat Management, Network Security

Judge halts fraud racket that went undetected for years


A federal judge in Illinois has ordered the shutdown of a well-orchestrated operation that made fraudulent credit and debit card charges — often for as little as 20 cents at a time — to dupe victims out of millions of dollars.

Judge Ronald Guzman, sitting in the U.S. District Court for the Northern District of Illinois, granted the injunction in response to a complaint filed March 9 by the Federal Trade Commission (FTC), the agency said Monday.

The FTC contended that starting in 2006, the defendants used stolen card numbers — exactly where they obtained the numbers is not known — to make more than $10 million in fake charges on behalf of dummy companies, according to a news release. In most cases, the more than one million victims didn't even notice the transactions on their statements because the culprits made charges between 20 cents and $10, and usually only targeted each card once.

"The vast majority of consumers, however, either do not notice these charges, misunderstand them, or do not file formal complaints with their credit or debit card issuer to challenge the charges," according to the complaint.

Those who did call a toll-free number that appeared next to each phony charge on victims' credit card statements found that the numbers were either disconnected or calls were not returned, the FTC said.

To make the scam seem legitimate, the defendants erected 16 fictitious companies – with names such as Confident Inc. and SMI Imports LLC – that allowed them to open more than 100 merchant accounts with credit card processors, the FTC said. The imitation companies were created to resemble legitimate organizations and came outfitted with a "virtual" office address, phone number, website and the tax number for a real corporation.

In addition, the defendants contracted with at least 14 money mules, who were either knowing or unwitting to the scam, to form these 16 dummy corporations, open bank accounts to receive the payments, and then transfer the stolen money to accounts in Eastern Europe and Central Asia, according to the news release. The mules were recruited through spam messages claiming to be searching for a U.S. finance manger to work at an international financial services firm.

The criminals behind the scheme are not known, but authorities are working to find them. The injunction ordered by Guzman freezes the gang's assets.

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