Federal regulators ordered Atlanta-based First Data and a former executive to pay a combined $40 million for their involvement in electronic payment scams that stole millions of dollars from consumers.
Chi “Vincent” Ko and First Data Merchant Services knowingly processed payments and laundered credit-card transactions for scam artists who targeted hundreds of thousands of customers, according to the Federal Trade Commission.
Through his own separate company, Ko’s actions between 2012 and 2014 helped scammers create fake accounts to steal money from consumers, the FTC said. Ko opened hundreds of merchant accounts for scams that were the subject of FTC investigations and a federal criminal prosecution.
First Data allowed Ko to use its payment-processing services to facilitate the fraud and ignored warnings from banks and employees that Ko was laundering money. First Data later hired Ko as an executive.
First Data “repeatedly looked the other way while its payment processing services were being used to commit fraud,” Daniel Kaufman, an FTC deputy director, said in a press release.
First Data Merchant Services is a subsidiary of Fiserv, a Brookfield, Wis., company that makes banking software. Fiserv acquired First Data in July 2019 for $22 billion.
Ko, who specialized in serving the Asian restaurant industry, was unaware his clients were conducting fraud and was himself a victim, his New York-based attorney said.
“Mr. Ko unequivocally denies prior knowledge that these agents and merchants were engaged in fraud,” lawyer Jim Walden said in an emailed statement.
The settlement related to a single client within First Data’s wholesale channel, Fiserv said in an emailed statement. Fiserv also agreed to enhance its fraud-monitoring and compliance policies.
“We remain committed to ensuring that our business partners and merchants operate with integrity,” Fiserv said.
Walden and a Fiserv spokeswoman declined to say if Ko was based in the Atlanta area during his employment with the company.
A federal judge still must approve the agreement that requires First Data to pay $40 million and Ko $270,000. They will have seven days from the judge’s approval to make the payments.
The FTC will use the settlement money to refund consumers hurt by the scams, said Jay Mayfield, an agency spokesman.
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