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US freezes assets in alleged Net scams

By Bloomberg News
January 28, 2011

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WASHINGTON — A US judge in Nevada froze the assets of 61 companies sued by the Federal Trade Commission as it seeks to recover about $275 million allegedly taken from consumers in online scams, the agency said.

The FTC, in its complaint filed on Jan. 12 in Las Vegas, accuses the companies, known as I Works, of deceptively luring consumers into online memberships and then charging their credit cards or checking accounts unauthorized fees. The alleged leader of the operation, Jeremy Johnson, and nine other individuals were also sued.

The operation used websites to pitch free information on money-making programs or government grant opportunities, the FTC said. Consumers were asked for credit or debit cards to pay shipping fees of less than $2 then found one-time fees of up to $129.95 on their bills along with monthly fees of up to $59.95, according to the FTC’s complaint.

No lawyer for I Works or Johnson was listed in court records. A recording on the company’s phone said it was “currently closed’’ and no one immediately responded to a voice-mail message seeking comment on the case.

The freeze order couldn’t be independently confirmed from electronic court records.

More than 500,000 consumers sought refunds of charges by I Works, which landed the companies in monitoring programs run by Visa Inc. and MasterCard Inc., the FTC said.

The chargebacks resulted in millions of dollars in fines by the card companies and caused the banks to shut down the defendants’ access to credit and debit card billing systems, the FTC said. The defendants then tricked the banks into continued access to the billing systems by creating shell companies, the FTC claimed in the complaint.

The FTC also alleged the defendants violated the Electronic Fund Transfer Act and Regulation E by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.