FTC says scammers stole millions, using virtual companies
IDG News Service - The U.S. Federal Trade Commission has disrupted a long-running online scam that allowed offshore fraudsters to steal millions of dollars from U.S. consumers -- often by taking just pennies at a time.
The scam, which had been run for about four years years, according to the FTC, provides a case lesson in how many of the online services used to lubricate business in the 21st century can equally be misused for fraud.
"It was a very patient scam," said Steve Wernikoff, a staff attorney with the FTC who is prosecuting the case. "The people who are behind this are very meticulous."
The FTC has not identified those responsible for the fraud, but in March, it quietly filed a civil lawsuit in U.S. District Court in Illinois. This has frozen the gang's U.S. assets and also allowed the FTC to shut down merchant accounts and 14 "money mules" -- U.S. residents recruited by the criminals to move money offshore to countries such as Bulgaria, Cyprus, and Estonia.
"We're going to aggressively seek to identify the ultimate masterminds behind this scheme," Wernikoff said. According to him, the scammers found loopholes in the credit card processing system that allowed them to set up fake U.S. companies that then ran more than a million phony credit card transactions through legitimate credit card processing companies.
Wernikoff doesn't know where the scammers obtained the credit card numbers they charged, but they could have been purchased from online carder forums, black market Web sites where criminal buy and sell stolen information.
The scammers stayed under the radar by charging very small amounts -- typically between $0.25 and $9 per card -- and by setting up more than 100 bogus companies to process the transactions.
U.S. consumers footed most of the bill for the scam because, amazingly, about 94 percent of all charges went uncontested by the victims. According to the FTC, the fraudsters charged 1.35 million credit cards a total of $9.5 million, but only 78,724 of these fake charges were ever noticed. Typically they floated just one charge per card number, billing on behalf of made-up business names such as Adele Services or Bartelca LLC.
As credit cards are increasingly being used for inexpensive purchases -- they're now accepted by soda machines and parking meters -- criminals have cashed in on the trend by running this type of unauthorized charging scam.
"They know that most of the fraud detection systems won't detect anything under $10 and they know that consumers won't complain about a 20 cent fee," said Avivah Litan, an analyst with the Gartner research firm who follows bank fraud. "What's different here is the scale, and that they got away with it for so many years," she said.
This pilot fish is a contractor at a military base, working on some very cool fire-control systems for tanks. But when he spots something obviously wrong during a live-fire test, he can't get the firing-range commander's attention.
- IT Certification Study Tips
- Register for this Computerworld Insider Study Tip guide and gain access to hundreds of premium content articles, cheat sheets, product reviews and more.
- Reduce federal infrastructure risk with compliance management and situational awareness
- IBM continuous monitoring and management solutions deliver real-time situational awareness to help federal agencies understand vulnerabilities, and protect the infrastructure.
- How Four Citrix Customers Solved the Enterprise Mobility Challenge
- Managing mobile devices, data and all types of apps-Windows, datacenter, web and native mobile- through a single solution.
- 8 Steps to Fill the Mobile Enterprise Application Gap
- Traveling executives and Millennials alike expect to communicate, collaborate and access their important work applications and data from anywhere on whatever device they...
- Seattle Children's Accelerates Citrix Login Times by 500% with Cross-Tier Insight
- Seattle Children's is a leading research hospital with a large and growing Citrix XenDesktop deployment. With ExtraHop, the IT team at Seattle Children's...
- McKesson Makes Application Hosting for Hospitals Faster, More Efficient
- With ExtraHop, McKesson identified the root cause of slow Citrix XenApp application launches and adopted a more intelligent, proactive IT operations model that... All Government IT White Papers
- Keep Servers Up and Running and Attackers in the Dark An SSL/TLS handshake requires at least 10 times more processing power on a server than on the client. SSL renegotiation attacks can readily...
- On Demand: Mastering the Art of Mobile Content Management Mobile device usage in the enterprise has skyrocketed, and it continues to escalate. IT must answer to users who demand access to their...
- DevOps with PureApplication System: Reduce cost and speed delivery with an integrated IBM Cloud solution Join this webcast to hear what ING Netherlands has been able to achieve while deploying DevOps tools from IBM Rational. An ING executive...
- NSS Labs & Cisco Present: Evaluating Leading Breach Detection Systems Today's constantly evolving advanced malware and APTs can evade point-in-time defenses to penetrate networks. Security professionals must evolve their strategy in lockstep to...
- Will the Real Endpoint Threat Detection and Response Please Stand Up? This webinar explores new technologies & process for protecting endpoints from advanced attackers as well as the innovations that are pushing the envelope...
- All Government IT Webcasts