Criminals seeking to accept payments by credit and debit cards face a big problem -- how to steer money through a global financial system where card networks, banks and regulators doggedly prowl for suspicious transactions. Prosecutors said Shalon and conspirators offered a solution.
They allegedly set up a sophisticated processing system that funneled hundreds of millions of dollars for criminals while charging a fee for each transaction -- more than $18 million total. Tactics described in the indictment ranged from old-fashioned bribery to other strategies requiring mo
First, Shalon set up a bogus pet-supply store and dress shop. Then, every time a card was used by a U.S. gambler, he and his accomplices made it look like payments went to fake stores selling pet supplies and wedding dresses.
When card networks caught the ring’s illegal payments, they imposed millions of dollars in penalties on banks that let transactions slip through. Shalon and his accomplices allegedly feigned shock, reimbursed the banks, then set up more accounts, according to prosecutors.
Hacking the Watchdogs
When all else failed, they hacked the watchdogs.
Shalon’s alleged victims included a risk-intelligence firm in Bellevue, Washington, that flagged merchants accepting payments for “unlawful goods or services," according to the indictment.
Prosecutors said the defendants hacked into the company’s computer network to read e-mails and keep tabs on its efforts. The hackers figured out which credit and debit cards the company used to detect bogus merchants, then blacklisted those card numbers from Shalon’s network.
With hundreds of millions rolling in from their global enterprise, the gang needed a way to process and launder its cash, prosecutors said.
Shalon, Orenstein and others used Shalon’s bitcoin-exchange company, Coin.mx, to process transactions and hide their origins, while charging fees on each deal. Murgio, the ex- Florida State University student arrested over the summer, operated Coin.mx.