By Theodore F. Monroe and Bradley O. Cebeci, TFMLaw

Recently, the criminal case against online merchant Jeremy Johnson in Utah that started back in June 2011 finally came to a close. After more than four years of litigation and six weeks of trial, the jury found Johnson guilty of eight counts of making false statements to a bank, but acquitted him on 78 other charges, including bank fraud, wire fraud, conspiracy and money laundering. By far the biggest legal spectacle involving card-not-present high-risk processing in more than a decade, the Johnson case poses a cautionary tale to banks and ISOs inclined to bend the rules in search of profits; and to merchants willing to “bend the truth” to get access to the payments system.

This is the second of four articles that will use the case to examine card-not-present fraud from a legal perspective. Part 1 described the case and some of the issues the decision turned on. Part 2 looks at the involvement of CardFlex, one of the ISOs charged by the FTC of aiding Johnson in his alleged fraud.

CNP Series: Lessons from a CNP Fraud Scheme – Part 2 The CardFlex Side of the Story

We recently reported to you regarding the DOJ’s federal criminal conviction of Jeremy Johnson for making false statements to Wells Fargo for the purpose of opening a myriad of straw merchant accounts. Fallout from the case landed on the processors, ISOs and sales agents that worked with him, including CardFlex, Inc., which found itself squarely in the FTC’s crosshairs because of the matter.

CardFlex’s CEO, Andrew Phillips, contacted us shortly after Part 1 of this series ran to give us his side of the story. We found it riveting and wanted to share it.


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