A federal judge, at the request of the FTC, recently ordered Cliq Inc., a payment processing company, and its operators to pay $6.5 million for violating a 2015 federal court order intended to prevent the company from assisting in consumer fraud.

U.S. District Court in Nevada entered the order finding Cliq Inc, formerly known as Cardflex Inc., and executives Andrew Phillips and John Blaugrund in civil contempt for multiple violations of the 2015 order. “The court determined the defendants violated multiple core provisions of the 2015 federal court order by facilitating fraud on behalf of several scammers,” the FTC said.

Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection., said, “As the court concluded, Cliq and its executives assisted and facilitated scammers in avoiding fraud and risk monitoring programs and failed to conduct the 2015 order’s required underwriting. The court’s order should send a strong signal that the Commission will enforce its orders and continue to prioritize rooting out fraud from the American payment system.”

The court found the defendants unlawfully processed hundreds of millions of dollars in transactions for merchants on Mastercard’s Member Alert To Control High-risk merchants (MATCH) list.

The court also concluded that the defendants:

• “Assisted and facilitated two groups of merchants in avoiding fraud and risk monitoring programs, including by processing so-called ‘friendly’ transactions to mask true chargeback rates and helping a group of merchants both process under different names and shift transactions from closed accounts to other live accounts.
• Failed to conduct required underwriting, including neglecting to collect or verify mandatory business information, ignoring evidence of shell companies, and waiving documentation requirements.
• Processed for merchants that ‘consistently exceeded’ the court order’s chargeback thresholds and failed to conduct required investigations or produce written reports to justify processing, despite red flags. The court found the defendants had ‘systematically failed to complete [their] reporting obligations” under this portion of the order.’”

In a press release , Cliq took a different view of the outcome, asserting that the court “absolved it from accusations made in a motion, and subsequent media blitz,” by the FTC. Joanna Oliva, Cliq’s president and chief financial officer, pointed out that the court declined to appoint a receiver for the company, ban certain top executives from the payment processing industry, and award the $52.9 million in compensatory relief sought by the FTC.

Andy Phillips, Cliq’s CEO, said, “The court’s decision validates our robust compliance program and business practices, as well as our strong commitment to preventing fraudulent and illegitimate merchant activity.”  In its press release, Cliq stated that it had made significant investments over the past five years to enhance compliance and referenced both “the myriad of external audits” it undergoes annually as well as the stakeholder reviews conducted in the wake of the FTC’s complaint against it.