Five Charged In $28 Million Nutraceuticals Credit Card Fraud Affecting Thousands Of Consumers

[nitpicker]

https://www.justice.gov/usao-sdny/pr/five-charged-28-million-nutraceuticals-credit-card-fraud-affecting-thousands-consumers

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Thursday, June 29, 2017

Five Charged In $28 Million Nutraceuticals Credit Card Fraud Affecting Thousands Of Consumers

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and David E. Beach, Special Agent-in-Charge of the New York Field Office of the U.S. Secret Service (“USSS”), announced today the unsealing of charges against JAMES BECKISH, RICHARD WITCHER, JAMES TONER, PETER O’BRIEN, and JOSEPH ANTHONY DEMARIA for their respective roles in operating a series of companies between 2013 and 2016 that were used as a cover to place approximately $28 million of unauthorized charges on thousands of consumers’ credit cards. The websites of the defendants’ companies purported to sell products like dietary supplements but, in reality, were primarily used to repeatedly bill consumers who never ordered their products, or even if they did, almost never received them. All of the defendants were arrested today and presented before Magistrate Judges in the District of New Jersey, the Middle District of Florida, and the Southern District of Florida.
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Between 2013 and 2016, BECKISH, WITCHER, TONER, O’BRIEN, DEMARIA and others, created and operated more than 100 companies that purported to sell dietary supplements and similar products called “nutraceuticals.” Although the companies were purportedly distinct, they nonetheless marketed similar products on websites that contained similar photographs, were hosted by the same entity, had similar typographical errors, and used the same or nearly identical JavaScript coding. These websites were used by the defendants and others to serve as justification for unauthorized and recurring charges that were placed on tens of thousands of credit card numbers that the defendants had illicitly purchased or obtained, or had acquired from consumers who had attempted to order the products in question. For example, in one email between TONER and BECKISH in October 2013, TONER stated that they could simply charge unsuspecting customers by falsely “say[ing] they opted in online for something.” In total, more than $28 million in fraudulent charges were placed during the duration of the scheme.

BECKISH, WITCHER, TONER, O’BRIEN, DEMARIA, and others created these different companies and websites, moreover, because they knew that credit card processors would stop doing business with them over time as consumers noticed the unauthorized charges and sought refunds. These refunds, called “chargebacks” by credit card processors, are generally low for legitimate businesses but reached extremely high percentages for many of the companies associated with the defendants’ scheme. In certain instances, the chargeback rates quickly approached or even exceeded 20 percent – that is, consumers were seeking refunds of more than 20 percent of the charges placed by certain of the defendants’ companies. Credit card processors, in turn, paid millions of dollars in refunds for fraudulent charges associated with the defendants’ companies between 2013 and 2016 in attempts to refund affected consumers.
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