On May 21, the Federal Trade Commission announced that it had settled charges against payment processor Allied Wallet along with its CEO and owner, Ahmad Khawaja, and two other officers – Mohammad Diab and Amy Rountree. The charges stemmed from the FTC’s claim that the defendants knowingly processed payments for merchants that were engaged in fraud. The merchants included some that were currently subject to law enforcement actions by the FTC and the Securities and Exchange Commission, were engaged in an alleged phantom debt collection scheme, and who allegedly perpetrated a pyramid scheme, as well as two business coaching schemes that allegedly defrauded consumers with claims they would make substantial income.
The FTC’s complaint, filed in the U.S. District Court for the Central District of California, alleged that Allied Wallet and its owners/management teams helped these merchants hide their fraudulent practices by, among other things, creating fake foreign shell companies to open accounts in their names, submitting dummy websites and other false information to merchant banks, and actively working to evade card network rules and monitoring designed to prevent fraud.
The stipulated settlement order:
- prohibits Allied Wallet and its individual owners and managers from processing payments for certain types of merchants, including sellers and marketers of money-making opportunities and debt collection services;
- imposes stringent screening and monitoring requirements on payment processing for certain other categories of merchants to ensure proper screening and vetting; and
- imposes a $110 million equitable judgment against Allied Wallet and its owner.