FTC settles with payment processor Humboldt Merchant Services over shell-company fraud facilitation
The agency alleged Humboldt knowingly processed payments for more than 1,000 shell companies running fraudulent billing scams; the company will pay $12 million in consumer redress and is permanently barred from processing for several high-risk merchant categories.
The Federal Trade Commission announced on September 8 a settlement with Humboldt Merchant Services, LLC (operating as 5967 Ventures, LLC), resolving allegations that the payment processor knowingly facilitated payment processing for more than 1,000 shell companies engaged in fraudulent billing scams.
Under the stipulated order, Humboldt must pay $12 million for consumer redress. The company is also permanently prohibited from processing payments for a defined set of high-risk merchant categories going forward, including so-called straw companies, merchants placed on Mastercard's Alert to Control High-Risk Merchants list, and certain e-commerce entities that rely on third-party mailbox providers as their listed business address — categories regulators have repeatedly flagged as common vehicles for disguising fraudulent operations behind a payment processor's underwriting.
The FTC's complaint centered on Humboldt's role as the payment processor connecting those shell companies to the card networks, rather than alleging that Humboldt operated the underlying billing scams itself. As is standard in FTC consumer-protection settlements of this kind, Humboldt neither admitted nor denied the agency's allegations as part of the order.
The case adds to a string of FTC actions this year against payment processors and independent sales organizations accused of looking past red flags in merchant underwriting, an enforcement pattern regulators have said reflects how much fraud depends on payment access that a processor could have declined to grant.