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.
- 18 Hot IT Certifications for 2014
- CIOs Opting for IT Contractors Over Hiring Full-Time Staff
- 12 Best Free iOS 7 Holiday Shopping Apps
- For CMOs Big Data Can Lead to Big Profits
- Slideshow: 5 ways to lock down your mobile device
- Slideshow: 10 mistakes companies make after a data breach
- How to rob a bank: A social engineering walk through
- Which smartphone is the most secure?
If you think getting it right from day one is always what matters, you probably haven't been following technology too closely.
- 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.
- Bring Networks and Applications Closer--Cisco ONE
- A series of sweeping trends is placing new requirements on the tried-and-true network model--requiring network infrastructure and applications to communicate. Get the open...
- Lippis Research Reviews the Cisco Catalyst 2960-X
- In this Lippis Report Research Note, Lippis Research reviews the latest edition of the "most popular access switch on the planet" -- the...
- Design Guide--Scaling Up to a Campus-Wide LAN
- Is it time to scale your network environment to a campus wired LAN? Here's the framework you need to set up your LAN...
- Comprehensive Security: Cisco Catalyst 2960 Series
- With a rich and comprehensive set of security features, Cisco Catalyst 2960-X and 2960-XR Series Switches can help you address networking megatrends such...
- Be Energy Efficient--The Cisco Catalyst 2960 Series
- How much energy could be saved if all 230 million Layer 2 and 3 fixed managed switch ports sold in 2012 were as... All Government IT White Papers
- Modernizing SAP environments with minimum risk - a path to Big Data Hear from top IDC analyst, Richard Villars, about the path you can start taking now to enable your organization to get the benefits...
- Vblock™ Specialized System for SAP HANA® Overview video from DJ Long about the new Vblock Specialized System for SAP HANA®.
- The Power of the Citrix Mobility Solution, XenMobile Does everything become a smartphone? Or does the smartphone begin to do everything? How can we afford to support BYOD? Rather, how can...
- BYOD Happens: How to Secure Mobility How to navigate the journey of securing mobility, including the BYOD corruption of IT, the top ten mobility strategies, and the mobility management...
- Fighting Fraud Videos: IBM Intelligent Investigation Manager Short videos about IBM Intelligent Investigation Manager (IIM) for Fraud. IIM optimizes the investigation of fraud for customers across many industries in both...
- All Government IT Webcasts
Does your organization offer extensive benefits, cool perks, competitive salaries, opportunities for training and advancement? Then get it recognized!
Nominate your company or another deserving organization for Computerworld's 2014 Best Places to Work in IT list now through Dec. 20, 2013.