FTC Sues CardFlex and Other Payment Processors in iWorks Scheme

As part of the Federal Trade Commission’s (“FTC”) ongoing crackdown on payment processors, the agency recently charged two companies and their management teams with illegally processing credit card payments on behalf of a massive Internet scam known as iWorks. The FTC charged CardFlex, Inc., of Costa Mesa, California, Blaze Processing, LLC, of Rigby, Idaho, and Mach 1 Merchanting of Idaho Falls, Idaho, and four individual defendants with aiding iWorks in causing more than $26 million in unauthorized consumer charges. The FTC case against iWorks dates back to 2010 when the agency charged iWorks owner and operator Jeremy Johnson and 10 other individuals, 10 corporations and 51 shell companies with scamming consumers out of more than $275 million via deceptive “trial” memberships for bogus government-grant and money making schemes. Although CardFlex and the others were not named in the FTC federal case against iWorks, the case is significant in that it ties back to Jeremy Johnson, who allegedly hid his ownership of the shell companies. The civil complaint alleges that CardFlex and the other defendants caused the unauthorized charges to consumers' credit card accounts by actively employing, and advising or enabling the fraudulent merchants to employ numerous tactics, including establishing shell merchant accounts that were designed to evade fraud monitoring programs implemented by Visa and MasterCard.