Tuesday, September 26, 2023
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$26 Million for|Online Credit Scam

LAS VEGAS (CN) - A string of companies must pay $26 million for running an online credit card scheme called iWorks, a federal judge ruled Tuesday.

U.S. District Judge Miranda Du granted summary judgment to the Federal Trade Commission in its December 2010 lawsuit against Jeremy Johnson et al.

The FTC accused the defendants, including iWorks, of bilking consumers of more than $26 million through a "group of interrelated merchants, known as iWorks , to obtain and maintain merchant accounts that enabled iWorks to process unlawful credit and debit card payments through the Visa and MasterCard payment networks."

The defendants used "numerous tactics that were designed to evade fraud monitoring programs implemented by Visa and MasterCard," the FTC said.

Judge Du noted in her ruling that while reading the defendants' numerous websites, she was "struck by the fact it is never clear what precisely iWorks is providing."

"What is clear, however, is that the sites do not advertise a membership program," Du wrote.

"The sites initially hook consumers through claims about the large amount of money available in grants. It is made repeatedly clear to the consumer that huge amounts of money are being given away in the form of grants, and people are receiving this much-needed money to pay personal expenses."

To get the allegedly free money, consumers had to provide credit or debit card information for software downloads or CD shipping fees. Du said consumers were led to believe they were paying a onetime fee for a CD - not enrolling in a membership program with recurring monthly charges.

The FTC said that "iWorks' websites were replete with misrepresentations about the availability of grants for personal expenses and the likely profitability of money-making opportunities." It called the scam "an expensive bait-and-switch."

"Defendants' tactics included: (1) opening any merchant account with minimal underwriting as long as the account was personally guaranteed by iWorks' President; (2) opening at least 293 merchant accounts in 30 separate corporate names for processing iWorks transactions; (3) implementing a system by which iWorks was able to distribute sales transactions and chargebacks among their numerous merchant accounts in order to avoid detection by the credit card networks (a tactic known as 'load balancing'); and (4) ignoring excessive rates of transactions returned by consumers ('chargebacks') on iWorks' merchant accounts," the FTC said.

Defendants included Cardflex, of California; Idaho-based Blaze Processing, and Mach I Merchanting; Cardflex president Andrew M. Phillips, Cardflex officer/director John Blaugrund; Shane Fisher and Jeremy Livingston, managers and principals of Blaze Processing and Mach I Merchanting, among others.

The FTC's motion for summary judgment specified several website companies, including iWorks, but it did not mention all the defendant companies. Therefore, she granted summary judgment against "selected sites," such as iWorks, but "not the full universe of sites relied upon by the FTC."

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