Investigating the Issues That Affect You Most

Scam Turned Pennies into Millions, FTC Says

One victim calls it a "bank robbery in slow motion"

By Lisa Parker
|  Thursday, Sep 16, 2010  |  Updated 1:24 PM CDT
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A ring of thieves is raking in big bucks making small charges on credit cards -- $10 million over the last four years.

A ring of thieves is raking in big bucks making small charges on credit cards -- $10 million over the last four years.

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Roughly 50,000 Chicago consumers may have been affected in a credit card scam involving tiny transactions and not even realize it, feds say.

Consumers likely too busy to notice small, fraudulent charges made by phony companies have unknowingly given thieves more than an estimated $10 million over four years, the Federal Trade Commission says.

The fraud ring has hit at least a million credit and debit card users nationwide with one-time bogus charges: $9 one day.  Perhaps $.24 the next.

"We think in many instances the consumers may not of even seen the charge, particularly if it was $9," said FTC Assistant Director Todd M. Kossow.

The funds were funneled for years before the feds were tipped off by mounting complaints about the smallest of the small charges.  It's believed the masterminds of the scheme are located offshore.  A lot of the money was being sent to Eastern Europe, Kossow said.

Among the victims is Chicagoan Dave Zmyer, who described the scheme as bank robbery in slow-motion.

"I can't for the life of me seeing myself charging 24 cents somewhere," he said.

He caught the charge, flagged it, and got his bank to reverse it, even though the effort involved likely cost more than the money at hand.

"I assume most people don't and that's what these guys were counting on," he said.  "And that's one of the reasons I went ahead and did it."

The FTC says the crooks pulled it off by opening more than 100 merchant accounts using stolen IDs of people with great credit.  Once they persuaded the banks to let them charge cards, they hired dozens of "money mules" to move the cash.

Those "money mules" set up sham companies, hiding behind dummy websites and pretending to sell office supplies and electronics.  Nearly half of them listed addresses in Chicago, Park Ridge, Oak Brook, Schaumburg and Naperville.  Often, their phony company names were very similar -- perhaps only differing by a letter or two -- to a legitimate business.

No one has been arrested but a civil case has been filed in federal court in Chicago.  The FTC accuses the unknown fraudsters of opening more than 100 bogus merchant accounts that fed into sham businesses.  About $100,000 in assets has been seized, but that's just a fraction of what's already been sent overseas.

If you see strange charges on your bill, contact the Federal Trade Commission.

Target 5:  Investigating the Issues That Affect You Most

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