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Ring Allegedly Bilked Credit Card Companies of at Least $200 Million

Officials describe massive, sophisticated scam as one of the largest of its kind ever seen

Federal agents Tuesday arrested more than a dozen people involved in a credit card fraud scheme described as one of the largest of its kind ever uncovered by the Department of Justice, U.S. Attorney for New Jersey Paul Fishman announced at a press conference in Newark.

“The losses in this case are, in a word, massive,” Fishman said of the far-reaching conspiracy, which cost credit card issuers at least $200 million in losses. That estimate, however, is “conservative,” Fishman said, adding that it may in fact be much higher.

The elaborate scheme required “patience and skill” to carry out, Fishman also said Tuesday.
 
Eighteen people, who live mostly in New York and New Jersey, allegedly operated a ring that created 1,800 dummy addresses and more than 7,000 false identities using forged documents, Social Security numbers purchased from Americans moving out of the country and by other means.

Over at least the last six years, they then obtained more than 25,000 credit cards using the identities and fake addresses, federal authorities said.

Once they had secured the cards, the ringleaders would then use a variety of means to pump up the credit rating of each straw customer. Small purchases would be made using each card and the borrowed money paid back to boost the straw customer’s credit rating. The straw customers would also “borrow” money from phony lenders, known as “tradelines,” who would then withdraw the fake debt after a period of time to make it appear as though the borrowers had repaid a loan—another way to boost the fake borrower’s credit score.

Then, once a straw customer had a large line of credit on his or her credit card, it was time for what Fishman described as the “bust-out.” The ring would run up huge debts on the cards without any intention of repaying them, lining their pockets with profits while leaving the credit card issuers holding the bag.

One method the ring allegedly used to extract cash from the cards was to set up fake companies able to accept credit card payments. A phony credit card user would make a “purchase” at one of these businesses, for which the "merchant" would be reimbursed in cash by the credit card company.

Actual businesses were allegedly involved in the scheme too, including a number of Jersey City jewelry stores. Federal authorities previously had arrested four people and seized $2 million in gold from a Jersey City jewelry store.

Much of the loot was wired overseas. About $60 million was transferred to accounts in Pakistan, India, Saudi Arabia, Canada, Romania, Japan and elsewhere. None of the money is believed to have been used in support of terrorism, Fishman said. 

The 13 defendants were scheduled to appear in federal court in Newark Tuesday. 

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