FTC settles with payment processor over sham merchant accounts
Rule ChangesHumboldt Merchant Services pays $12 million, barred from processing for high-risk merchants
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Overview
Updated YesterdayA 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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Organizations Involved
Payment processor the FTC says opened accounts for more than 1,000 shell companies used in unauthorized billing scams.
US consumer protection agency that filed the proposed order against Humboldt on September 8, 2026.
Affiliated entity whose lower-risk bank identification number was used to route sham merchant transactions.
Unauthorized billing operation that used shell merchant accounts processed by Humboldt.
Timeline
December 2023 September 2026
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FTC files proposed order against Humboldt
Latest LegalProposed settlement requires $12M payment, permanent ban on high-risk merchant processing; filed in Eastern District of Michigan.
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FTC announces separate Nuvei settlement
LegalPayment processor Nuvei pays $4.85 million, must implement merchant screening reforms.
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FTC shuts down Legion Media
LegalUnauthorized billing operation that used Humboldt-processed shell accounts ceased operations.
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Humboldt learns of FTC investigation
InvestigationCompany stopped opening new Performance Marketing accounts around this time, per FTC complaint.
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Federal court shuts down CB Surety LLC
LegalAt DOJ request, court dismantled organization that set up shell entities for fraudulent supplement companies.
Historical Context
3 moments from history that rhyme with this story — and how they unfolded.
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.
The shell entity network was dismantled, cutting off payment processing for the fraud operations.
The case revealed the scale of shell merchant accounts and triggered scrutiny of the processors that handled them.
The CB Surety shutdown is the origin event in this enforcement chain, exposing Humboldt's role in processing for the shell entities.
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.
Legion Media's operations ceased and its billing infrastructure was dismantled.
The shutdown exposed the payment processing chain that enabled the fraud, leading to the Humboldt action.
The fraud Humboldt allegedly facilitated was Legion Media's billing scheme, tracing the full chain from scammer to processor.
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.
Nuvei pays $4.85 million for consumer redress and adopts screening requirements.
Establishes a template for FTC enforcement against payment processors that fail to screen merchants.
Announced the same week as the Humboldt settlement, showing the FTC pursuing payment processors in parallel across the industry.
