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FTC settles with payment processor over sham merchant accounts

FTC settles with payment processor over sham merchant accounts

Rule Changes

Humboldt Merchant Services agrees to pay $12 million, barred from processing for high-risk merchants

September 8th, 2026: FTC files proposed order against Humboldt

Overview

Updated Sep 9

A payment processor the FTC says opened accounts for more than 1,000 shell companies used in billing scams will pay $12 million and stop handling payments for high-risk merchants. The proposed settlement with Humboldt Merchant Services, announced September 8, permanently bars the company from processing for merchants the agency deems fraud-prone.

The Federal Trade Commission says Humboldt processed over $100 million between 2021 and 2023 through sham accounts that placed unauthorized charges on consumers' credit cards. The accounts carried chargeback rates around 7 percent, nearly ten times the thresholds Visa and Mastercard use to flag risk.

Why it matters

Every unauthorized charge on a consumer card passes through a processor that chose not to ask questions. This order makes that choice expensive.

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Key Indicators

$12M
Settlement payment to FTC
Held in escrow for consumer redress, due within 7 days of court order entry.
$100M+
Volume through sham accounts
Processed through fraudulent merchant accounts from 2021 through 2023.
1,000+
Sham merchant accounts
Shell entities that served as fronts for unauthorized billing operations.
7%
Chargeback rate on flagged accounts
Nearly ten times the 0.9%-1.5% thresholds used by Visa and Mastercard monitoring programs.

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Organizations Involved

Humboldt Merchant Services (5967 Ventures, LLC)
Humboldt Merchant Services (5967 Ventures, LLC)
Payment processing company
Facing $12M judgment and permanent ban on high-risk processing under proposed FTC order; separate private civil action (TRS Limited v. 5967 Ventures) pending in Kansas District Court

Payment processor the FTC says opened accounts for more than 1,000 shell companies used in unauthorized billing scams.
Federal Trade Commission (FTC)
Federal Trade Commission (FTC)
Federal Agency
Enforcing consumer protection law against payment processors

US consumer protection agency that filed the proposed order against Humboldt on September 8, 2026.
NorthAB, LLC (NAB)
NorthAB, LLC (NAB)
Affiliated entity
BIN used to hide high-risk merchant activity

Affiliated entity whose lower-risk bank identification number was used to route sham merchant transactions.
LM
Legion Media
Fraudulent company (shut down)
Shut down by FTC in 2024

Unauthorized billing operation that used shell merchant accounts processed by Humboldt.

Timeline

December 2023 September 2026

6 events Latest: September 8th, 2026 · 2 months ago
Tap a bar to jump to that date

  1. FTC files proposed order against Humboldt

    Latest Legal

    Proposed settlement requires $12M payment, permanent ban on high-risk merchant processing; filed in Eastern District of Michigan.

  2. FTC announces separate Nuvei settlement

    Legal

    Payment processor Nuvei pays $4.85 million, must implement merchant screening reforms.

  3. Private lawsuit against Humboldt surfaces on Kansas docket

    Legal

    TRS Limited v. Humboldt Merchant Services (5967 Ventures, LLC) is listed on PACER as case 2:26-cv-02036 in the Kansas District Court, with the docket noting the action was remanded. The claims are not detailed in the public listing.

  4. FTC shuts down Legion Media

    Legal

    Unauthorized billing operation that used Humboldt-processed shell accounts ceased operations.

  5. Humboldt learns of FTC investigation

    Investigation

    Company stopped opening new Performance Marketing accounts around this time, per FTC complaint.

  6. Federal court shuts down CB Surety LLC

    Legal

    At DOJ request, court dismantled organization that set up shell entities for fraudulent supplement companies.

Scenarios

1

Court approves Humboldt settlement order

Likely Resolves by End of 2026

Discussed by: FTC press release; stipulated order filed with Eastern District of Michigan

The FTC filed the proposed consent order with the U.S. District Court for the Eastern District of Michigan. Stipulated orders are typically approved by the judge without modification since both parties have agreed. Humboldt has already placed the $12 million in escrow, signaling intent to comply. Order entry would make the permanent prohibitions legally binding.

2

Humboldt violates order, faces contempt proceedings

Unlikely Resolves by End of 2027

Discussed by: Standard FTC enforcement risk; no public analysis anticipates this

The order permanently prohibits credit card laundering, processing for straw companies, and tactics to avoid fraud monitoring. If Humboldt resumes processing for prohibited merchant categories or assists others in doing so, the FTC can bring a contempt motion seeking additional penalties. The order's screening requirements for prospective clients add ongoing compliance obligations.

3

FTC expands payment processor enforcement push

Possible Resolves by Q2 2027

Discussed by: Payments Dive coverage of parallel Nuvei settlement

The FTC settled with Nuvei for $4.85 million the same week, requiring merchant screening reforms. Together with the Humboldt case, the agency is signaling that processors serving as intermediaries for fraud-facing merchants face real consequences. Additional enforcement actions against processors with similar patterns could follow.

4

Private parties sue Humboldt over fraud losses

Possible Resolves by End of 2027

Discussed by: PACER docket listing for TRS Limited v. Humboldt Merchant Services

TRS Limited v. Humboldt Merchant Services (5967 Ventures, LLC) is pending in Kansas District Court (case 2:26-cv-02036) with the action remanded. The FTC order resolves government claims only; banks, merchants, or consumers harmed by the unauthorized billing may pursue damages separately. The mg Magazine account notes the FTC's restrictions do not name cannabis, hemp, or CBD businesses as prohibited merchant categories, so the ban's scope is defined by specific categories, not the broad 'high-risk' label.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

September 2026

Nuvei FTC settlement (September 2026)

Global payment processor Nuvei agreed to pay $4.85 million and implement robust merchant screening practices to settle FTC charges that it facilitated merchant fraud. The proposed order prohibited Nuvei from processing for tech support telemarketers and required ongoing compliance monitoring.

Then

Nuvei pays $4.85 million for consumer redress and adopts screening requirements.

Now

Establishes a template for FTC enforcement against payment processors that fail to screen merchants.

Why this matters now

Announced the same week as the Humboldt settlement, showing the FTC pursuing payment processors in parallel across the industry.

2024

FTC shuts down Legion Media (2024)

The FTC shut down Legion Media, an unauthorized billing operation that placed charges on consumers' cards without their consent. Legion Media used shell merchant accounts processed by Humboldt to run its scheme.

Then

Legion Media's operations ceased and its billing infrastructure was dismantled.

Now

The shutdown exposed the payment processing chain that enabled the fraud, leading to the Humboldt action.

Why this matters now

The fraud Humboldt allegedly facilitated was Legion Media's billing scheme, tracing the full chain from scammer to processor.

December 2023

DOJ shuts down CB Surety LLC (December 2023)

At the DOJ's request, a federal court in the Eastern District of California shut down CB Surety LLC, an organization that had set up shell entities on behalf of fraudulent online supplement companies. Many of these shells became the sham merchant accounts Humboldt processed.

Then

The shell entity network was dismantled, cutting off payment processing for the fraud operations.

Now

The case revealed the scale of shell merchant accounts and triggered scrutiny of the processors that handled them.

Why this matters now

The CB Surety shutdown is the origin event in this enforcement chain, exposing Humboldt's role in processing for the shell entities.

Sources

(8)
+4
Federal Trade Commission Payments Dive PACER Monitor mg Magazine via Weedbay Federal Trade Commission Federal Trade Commission Federal Trade Commission Federal Trade Commission