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Seven Arrested In Connection With $3.5M Multi-State Bank Fraud Scheme

Seven people were charged for allegedly participating in a conspiracy to commit bank fraud across six states.

Navi Persaud

July 7, 2020

Seven people were charged for allegedly participating in a conspiracy to commit bank fraud in New Jersey, New York, Pennsylvania, Maryland, Virginia and Michigan over the course of two years, according to U.S. Attorney for New Jersey Craig Carpenito.

At Trenton federal court the defendants were charged with conspiracy to commit bank fraud in connection with a scheme that used hundreds of fraudulent accounts to defraud a number of major banks, resulting in more than $3.5 million in losses.

"From 2018 through April 2020, the defendants conspired with each other and others to defraud several major banks and electronic merchant processors," according to the criminal complaint.

The defendants established bank accounts tied to fake entities with no legitimate purpose. They then issued checks payable to other fake entities associated with the criminal organization, knowing that the accounts on which the checks were drawn contained insufficient funds, according to the complaint.

In addition they conducted a number of fraudulent credit card and debit card transactions among shell companies. In turn, this fraudulently credited payee accounts and fraudulently overdrew payor accounts. They also used the shell companies to issue temporary refund credits, also known as "charge-backs," to checking accounts associated with the their organization, where illegitimate transactions were made, according to the report.

"In each one of these instances, members of the criminal organization withdrew the funds (through ATMs or bank tellers) that banks and/or merchant processors had credited to the payee bank accounts at the time of the fraudulent transaction," according to the complaint.

"Because the defendants withdrew the credited funds from the payee accounts before the banks could recognize the fraudulent transactions, the banks and merchant processors were left with substantial losses."

The defendants were able to withdraw credited funds from the payee accounts before the banks recognized them as fraudulent transactions, leaving the banks with substantial losses. According to the report, the investigation identified 200 bank accounts and 75 merchant credit card processing accounts used in the schemes.

The defendants are facing up to 30 years in prison and a maximum fine of $1 million.

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