IMer Charged With Wire Fraud In Alleged $5M Bogus-Billing Scheme
Daniel Greenberg sold inexpensive clothing and household goods online. He and his his company, Classic Closeouts LLC, already had been the subjects of an FTC action, an asset freeze, a receivership, a $2.08 million civil judgment and an order from a federal judge that banned him from "owning, controlling, or consulting for any Internet-related business that handles consumers' credit card or debit card accounts."
He now has been charged criminally and arrested by the U.S. Postal Inspection Service.
One of the central issues is an alleged billing scheme in which Greenberg retained the credit-card numbers of his customers and then enrolled them in a "frequent shopper club" without their knowledge and consent.
Greenberg, in at least 70,000 separate transactions, allegedly dinged credit cards and bank accounts for more than $5 million over a period of about six months, triggering service-providers and chargeback monitors to begin their own investigations.
The scheme began to unravel at least in part when one of Greenberg's employees who also was a customer noticed her credit card had been dinged, according to prosecutors.
A purported email blast to 700,000 present and past customers is referenced in the criminal complaint. The purported blast appears to have been used to explain an extreme condition that allegedly resulted in tens of thousands of chargebacks.
There are many disturbing allegations in this case. The one reproduced verbatim in the paragraph immediately below, perhaps, is the most disturbing. It is from the affidavit for the arrest warrant and speaks compellingly about how tens of thousands of people simultaneously can get swept into a scam and lose money in relatively small amounts that add up to a huge amount for the scammer, how IMers who get cornered as a result of their scheming may engage in fantastic constructions to explain the impossible or highly improbable and how a single online scam can undermine confidence in the marketplace and cause payment processors, credit-card companies and other service providers also to lose money. (Italics/bolding added):
"On June 30, 2009, the Receiver questioned defendant DANIEL GREENBERG about the increase in charges to CCL customers between June 2008 and December 2008. GREENBERG told the Receiver that he and CCL had developed CCL's own software program pursuant to which CCL e-mailed offers to past CCL customers to join its gold and platinum buying programs. He stated that the solicitation was not in connection with any purchase of merchandise by the customer, and that by merely clicking on the e-mail, customers opted into the program and agreed to have their credit cards charged. GREENBERG stated that the charges were assessed for the right to receive e-mail notices of sales and free delivery of goods, and that the e-mails had emanated from CCL's office at 110 West Graham Avenue."
The saving grace -- if it can be called that -- is that neither the receiver nor law enforcement bought this explanation:
"Significantly," according to the affidavit for the arrest warrant, "not a single customer who filed a complaint ever received an e-mail offer from CCL, or anyone else, to join CCL's frequent shopper club."
Greenberg is alleged to have provided false documentation that caused banks to rule in his favor when customers filed chargebacks.
Here is an interesting footnote attributed to the risk manager of the company Greenberg used to process payments. I couldn't help but think about the recent discussions on the WF about payment processors/facilitators and risks:
"According to the Risk Manager, in May 2008 CCL had 1,894 sales totaling $82,510.21; in June 2008 the sales jumped in number to 9,889 totaling $567,609.73; in July 2008 sales rose in number to 26,057 totaling $1,892,112.80; and in August 2008 sales hit their peak number of 27,058 totaling $1,876,859.77."
It turns out that the processing company joined Greenberg's customers as losers, according to the affidavit.
The firm "suffered a loss of approximately $1,018,000 because it reimbursed issuing banks for chargebacks that CCL failed to pay for," according to the affidavit.
All in all, tens of thousands of chargebacks occurred as a result of the scam, and Greenberg was able to get many of them reversed by providing false documentation, according to the affidavit.
Read the affidavit:
http://www.stopfraud.gov/news/greenberg-complaint.pdf
Patrick
He now has been charged criminally and arrested by the U.S. Postal Inspection Service.
One of the central issues is an alleged billing scheme in which Greenberg retained the credit-card numbers of his customers and then enrolled them in a "frequent shopper club" without their knowledge and consent.
Greenberg, in at least 70,000 separate transactions, allegedly dinged credit cards and bank accounts for more than $5 million over a period of about six months, triggering service-providers and chargeback monitors to begin their own investigations.
The scheme began to unravel at least in part when one of Greenberg's employees who also was a customer noticed her credit card had been dinged, according to prosecutors.
A purported email blast to 700,000 present and past customers is referenced in the criminal complaint. The purported blast appears to have been used to explain an extreme condition that allegedly resulted in tens of thousands of chargebacks.
There are many disturbing allegations in this case. The one reproduced verbatim in the paragraph immediately below, perhaps, is the most disturbing. It is from the affidavit for the arrest warrant and speaks compellingly about how tens of thousands of people simultaneously can get swept into a scam and lose money in relatively small amounts that add up to a huge amount for the scammer, how IMers who get cornered as a result of their scheming may engage in fantastic constructions to explain the impossible or highly improbable and how a single online scam can undermine confidence in the marketplace and cause payment processors, credit-card companies and other service providers also to lose money. (Italics/bolding added):
"On June 30, 2009, the Receiver questioned defendant DANIEL GREENBERG about the increase in charges to CCL customers between June 2008 and December 2008. GREENBERG told the Receiver that he and CCL had developed CCL's own software program pursuant to which CCL e-mailed offers to past CCL customers to join its gold and platinum buying programs. He stated that the solicitation was not in connection with any purchase of merchandise by the customer, and that by merely clicking on the e-mail, customers opted into the program and agreed to have their credit cards charged. GREENBERG stated that the charges were assessed for the right to receive e-mail notices of sales and free delivery of goods, and that the e-mails had emanated from CCL's office at 110 West Graham Avenue."
The saving grace -- if it can be called that -- is that neither the receiver nor law enforcement bought this explanation:
"Significantly," according to the affidavit for the arrest warrant, "not a single customer who filed a complaint ever received an e-mail offer from CCL, or anyone else, to join CCL's frequent shopper club."
Greenberg is alleged to have provided false documentation that caused banks to rule in his favor when customers filed chargebacks.
Here is an interesting footnote attributed to the risk manager of the company Greenberg used to process payments. I couldn't help but think about the recent discussions on the WF about payment processors/facilitators and risks:
"According to the Risk Manager, in May 2008 CCL had 1,894 sales totaling $82,510.21; in June 2008 the sales jumped in number to 9,889 totaling $567,609.73; in July 2008 sales rose in number to 26,057 totaling $1,892,112.80; and in August 2008 sales hit their peak number of 27,058 totaling $1,876,859.77."
It turns out that the processing company joined Greenberg's customers as losers, according to the affidavit.
The firm "suffered a loss of approximately $1,018,000 because it reimbursed issuing banks for chargebacks that CCL failed to pay for," according to the affidavit.
All in all, tens of thousands of chargebacks occurred as a result of the scam, and Greenberg was able to get many of them reversed by providing false documentation, according to the affidavit.
Read the affidavit:
http://www.stopfraud.gov/news/greenberg-complaint.pdf
Patrick