FTC Alleges $467 Million Fraud Scheme Pushed By Internet Marketers, Affiliates
"Shell corporations" were used to advance the scheme, and financial-service providers were hoodwinked into processing payments in part because the scammers set up "dummy" websites to sanitize the operations, the FTC said.
Canadian authorities worked with U.S. regulators to expose the scam, officials from both countries said.
“Internet fraud is a global problem that requires an international enforcement response,” said Lisa Campbell, deputy commissioner of competition for the Competition Bureau of Canada. “International cooperation ensures that fraudsters can’t hide behind borders.”
Consumer losses were estimated at $412 million (U.S.). Numerous individuals and companies were named defendants in the FTC action. The agency said the scheme falsely traded on the names of Oprah Winfrey, Rachael Ray, CNN, USA Today, CBS, the “60 Minutes” television show and other brands.
Winfrey has sued the principal defendant, Jesse Willms, according to records. Willims resides in Canada, and described the FTC action as a "disagreement."
A big part of the scheme allegedly centered on fraudulent billing practices. The FTC described the alleged scam as a continuity-billing scheme that sucked in customers by using a "free trial" lure.
Claims about purported cancer cures and weight loss through consumption of ****-berry products also were part of the scam, the FTC said.
At the same time, online "penny auctions" with hidden terms that resulted in bogus billing also were part of the fraud, the FTC charged.
Today alone the FTC brought actions that alleged online fraud of nearly half a billion dollars. The agency also sued a company in Florida, amid allegations it was conducting a precious-metals fraud on its website, which has been seized by a court-appointed receiver.
The Commodity Futures Trading Commission (CFTC) also sued the Florida company and its operators, alleging that customers were duped into believing they were purchasing precious metals stored in independent depositories.
In reality, the CFTC said, the purported precious-metals firm actually was a telemarketing "boiler room" and the purported metal purchases were fictitious.
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