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Online credit card scammers must pay $26 million following an FTC action over the scheme. The U.S. District Court of Nevada ruled that Cardflex, Blaze Processing, Mach I Merchanting and their officers, operating together through a series of iWorks websites, had fraudulently and illegally bilked consumers out of millions of dollars.
The iWorks scam promised consumers that they could get rich quick through online advertising and obtain government grants to pay off personal debts. Instead, consumers were enrolled in membership plans and repeatedly charged for services that were not delivered.
Sign up Here for Free Money!
According to the court, the iWorks websites claimed that consumers could make money from their couch through online advertising. The sites offered testimonials that were intended to create a false impression that consumers would obtain the same instant riches as the individuals portrayed. The websites also promised consumers information on grants allegedly being distributed by the government -- free money! Thanks, Obama! The websites would then say they are charging a small S&H fee, usually just a few dollars, to send out the information.
Sadly, the only ones getting rich off iWorks were the scammers running it. Customers found themselves being repeatedly billed for membership services they never agreed to. Bank accounts were routinely debited and credit cards charged without receiving authorization from consumers.
Beating the System, For Now
Credit card companies have sophisticated systems to detect fraud, yet none of them picked up on iWorks. The defendants managed to avoid detecting through a process called "balancing the load" -- making sure that no one account or corporate name was taking in too much money.
iWorks implemented a labyrinthine system to help it process the false charges and avoid fraud detection -- 293 merchant accounts in 30 separate corporate names. The process worked, at least until the FTC opened an investigation. Over several years the Commission untangled iWorks' web of scam websites and merchant accounts. Though perhaps some unraveling remains to be done -- as the court's decision notes, the FTC's motion for summary judgment did not name all websites and companies involved, meaning the court's decision did not yet reach the "full universe" of scam sites.