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.
- Silicon Valley's 19 Coolest Places to Work
- Is Windows 8 Development Worth the Trouble?
- 8 Books Every IT Leader Should Read This Year
- 10 Hot Hadoop Startups to Watch
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
This state transportation department uses computer science students from a local university as programming interns, and everyone is happy with the arrangement -- until one intern learns how to bring down the mainframe.
- 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.
- Changing the Way Government Works: Four Technology Trends that Drive Down Costs and Increase Productivity
- This paper discusses four technology-based approaches to improving processes and increasing
productivity while driving down department and agency costs.
- Infographic: Converged Infrastructure Benefits
- This Infographic quantifies the savings organizations are realizing from increased deployment speed, higher availability, and lower annual costs.
- CIOs Deliver Productivity Breakthroughs with Intelligent Digital Signage
- Retailers have long recognized the influence that digital signage provides over a shopper's point-of-purchase decision making process.
- Going Paperless? Here's What You Need to Think About
- As makers of some of the world's most popular PDF solutions, we often consult with businesses & governmental agencies that have the goal...
- The Big Data Opportunity for HR and Finance
- If CEOs, CFOs, CIOs, and CHROs want to drive their businesses forward, they will need to quickly recognize the enormous value of big... All Government IT White Papers
Enhance Your Virtualization Infrastructure With IBM and Vmware
Date: Wednesday, May 14, 2014, 1:00 PM EDT
Virtualization technology is now expanding beyond the server compute elements to encompass networking and storage...
Transforming Finance, Procurement and Supply Chain Effectiveness with Cross-Functional Analytics
Date: May 6th, 2014
Time: 1 PM EDT
Attend this Webcast to find out how Oracle's packaged analytic applications enable line-of-business managers to examine all...
- Cloud Knowledge Vault Learn how your organization can benefit from the scalability, flexibility, and performance that the cloud offers through the short videos and other resources...
- LIVE EVENT: 5/7, The End of Data Protection As We Know It. Introducing a Next Generation Data Protection Architecture. Traditional backup is going away, but where does this leave end-users?
- On-demand webinar: "Mobility Mayhem: Balancing BYOD with Enterprise Security" Check out this on-demand webinar to hear Sophos senior security expert John Shier deep dive into how BYOD impacts your enterprise security strategy...
- All Government IT Webcasts