The Federal Trade Commission on Tuesday announced a $12-million settlement with 5967 Ventures LLC, doing business as Humboldt Merchant Services, alleging the payment processor opened and serviced accounts for more than 1,000 shell companies that served as fronts for fraudulent operators running unauthorized billing schemes.
Under a proposed order filed in the U.S. District Court for the Eastern District of Michigan, Humboldt will pay $12 million toward consumer redress and face permanent restrictions on processing payments for several categories of merchants associated with heightened fraud risks. Humboldt neither admitted nor denied the allegations in the FTC’s complaint, except as necessary to establish the court’s jurisdiction.
According to the FTC’s complaint, Humboldt processed payments for merchants it knew, or consciously avoided knowing, were shell entities controlled by undisclosed third parties. Among them were entities connected to CBD and keto merchant Legion Media, an operation the FTC accused of facilitating unauthorized billing and credit card laundering. Legion was shut down permanently in 2024.
The FTC alleged Humboldt processed more than $100 million through the sham merchant accounts between 2021 and 2023 alone.
The agency also alleged Humboldt opened accounts despite significant warning signs. The FTC said the accounts typically generated chargeback rates almost 10 times higher than levels Mastercard and Visa consider excessive. Humboldt also allegedly attempted to increase transaction volume by moving certain accounts onto a lower-risk bank identification number, or BIN, used by an affiliated entity, increasing the likelihood cardholders’ banks would approve the transactions.
Katherine White, deputy director of the FTC’s Bureau of Consumer Protection, said, “This case underscores the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses.”
Beyond the monetary payment, the proposed order prohibits Humboldt from engaging in or assisting credit card laundering, providing false or misleading information to obtain payment processing, and using tactics designed to evade fraud and risk monitoring, including load balancing.
The proposed order also prohibits Humboldt from processing payments for four categories of merchants:
- Straw companies.
- Merchants listed on Mastercard’s Member Alert to Control High-Risk Merchants (MATCH) list for specified reasons including excessive chargebacks or fraud, laundering, merchant collusion, illegal transactions, or identity theft.
- Merchants previously named as defendants in certain FTC, federal law enforcement, or state attorney general consumer-protection actions involving fraud or unfair, deceptive, or abusive practices.
- Certain e-commerce merchants whose only business locations or mailing addresses are third-party mailbox or forwarding services, post office boxes, registered-agent offices, virtual offices, or similar services and that also use negative-option billing, lack previous credit card processing history, or were organized within the previous year.
The Commission voted 2-0 to approve filing the proposed order. Stipulated orders carry the force of law once approved and signed by a district court judge.
The action has particular relevance for businesses operating in specialty and high-risk markets. Humboldt promotes itself as a processor for “hard-to-place” merchants and specifically markets payment-processing services to CBD and hemp businesses. However, the FTC’s proposed restrictions do not identify cannabis, hemp, or CBD businesses as prohibited merchant categories. Instead, the case focuses on merchant identity, deceptive billing, excessive chargebacks, transaction laundering, and attempts to evade card-network fraud controls.
More in-depth report to follow.
