Four charged with defrauding acquirers, card brands

The U.S. Department of Justice indicted four individuals, including several executives of a Los Angeles-based payment processing company, for conspiring to deceive banks into allegedly processing more than $150 million in credit and debit card payments on behalf of 100 sham merchants. The sham merchants were engaged in online gaming, debt collection, debt relief, online pharmaceuticals and payday lending, alleged to have been misclassified as legitimate businesses to secure processing services.

Among the indicted was Ahmad "Andy" Khawaja, owner and CEO of the Los Angeles-based payment processing company Allied Wallet Inc., which specialized in serving online businesses. Also indicted were Allied COO Mohammad "Moe" Diab, of Glendale, Calif.; Amy Ringler Rountree, of Logan, Utah, who served as Allied's vice president of operations; and Thomas Wells, owner of Martin County, Fla.-based Priority Payout, described as a referral partner of Allied.

Khawaja and Wells were charged with wire fraud. Diab and Rountree were charged with wire fraud conspiracy and bank fraud conspiracy. Diab, Rountree and Wells were arrested last month, and are scheduled to appear in federal court in Boston. Khawaja, along with Diab and others were indicted in 2019 on campaign finance law violations and obstruction of justice. Khawaja remains a fugitive.

The case falls under the jurisdiction of the U.S. Attorney for the District of Massachusetts because the scheme allegedly directed phone calls and emails regarding transactions to a Massachusetts office.

Facing prison, hefty fines

The four are alleged to have schemed to defraud several acquirers, the card brands and others by inducing them to provide payment processing services for prohibited or high-risk businesses, as well as businesses that were terminated for fraud, chargeback or other compliance issues.

Those indicted, as well as unnamed co-conspirators, are alleged to have created shell companies, complete with fake websites that were purported to sell low-risk retail and home goods, and using industry-standards codes that mischaracterized the true nature of the transactions, the DOJ said in a press release. In all, the scheme is alleged to have resulted in $150 million in card transactions originating from 100 sham merchants.

If convicted of wire fraud, those indicted could face up to 20 years in prison, as well as fines up to twice the gross amount of the bogus transactions ($300 million). Under federal law, bank fraud conspiracy carries a prison sentence of up to 30 years and fines of up to twice the amount of fraudulent transactions.

The list of federal investigating agencies and offices is long, and includes the DOJ's criminal division, Food and Drug Administration, U.S. Postal Inspection Service and U.S. Immigration and Customs Enforcement.

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