JOHN F. WALTER, District Judge.
On November 13, 2018, Plaintiff, the Federal Trade Commission ("Commission" or "FTC"), filed its Complaint for Permanent Injunction and Other Equitable Relief in this matter, subsequently amended as First Amended Complaint for Permanent Injunction and Other Equitable Relief (as amended, "Complaint"), pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, the Restore Online Shoppers' Confidence Act ("ROSCA"), 15 U.S.C. § 8404, and Section 918(c) of the Electronic Fund Transfer Act ("EFTA"), 15 U.S.C. § 1693o(c). The Commission and Defendants Mark Moskvins and SIA Transact Pro stipulate to the entry of this Stipulated Order for Permanent Injunction and Monetary Judgment to resolve all matters in dispute in this action between them.
THEREFORE, IT IS ORDERED as follows:
1. This Court has jurisdiction over this matter.
2. The Complaint charges that Settling Defendants participated in unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a), through processing charges to consumers' credit and debit cards on behalf of an Internet marketing operation known as the Apex Enterprise.
3. Settling Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order. Only for purposes of this action, Settling Defendants admit the facts necessary to establish jurisdiction.
4. Settling Defendants waive any claim that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Order, and agree to bear their own costs and attorney fees.
5. Settling Defendants and the Commission waive all rights to appeal or otherwise challenge or contest the validity of this Order.
For the purpose of this Order, the following definitions apply:
A. "
B. "
C. "
D. "
E. "
F. "
G. "
H. "
I. "
J. "
K. "
L. "
M. "
N. "
1. articles to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body or any part thereof intended for cleansing, beautifying, promoting attractiveness, or altering the appearance; and
2. articles intended for use as a component of any such article, except that such term shall not include soap.
O. "
P. "
1. Presenting or depositing into, or causing or allowing another to present or deposit into, the credit card system for payment, a Credit Card Sales Draft generated by a transaction that is not the result of a credit card transaction between the cardholder and the Merchant;
2. Employing, soliciting, or otherwise causing or allowing a Merchant, or an employee, representative, or agent of a Merchant, to present to or deposit into the credit card system for payment, a Credit Card Sales Draft generated by a transaction that is not the result of a credit card transaction between the cardholder and the Merchant; or
3. Obtaining access to the credit card system through the use of a business relationship or an affiliation with a Merchant, when such access is not authorized by the Merchant Account agreement or the applicable credit card system.
Q. "
R. "
1. any product labeled as a dietary supplement or otherwise represented as a dietary supplement; or
2. any pill, tablet, capsule, powder, softgel, gelcap, liquid, or other similar form containing one or more ingredients that are a vitamin, mineral, herb or other botanical, amino acid, probiotic, or other dietary substance for use by humans to supplement the diet by increasing the total dietary intake, or a concentrate, metabolite, constituent, extract, or combination of any ingredient described above, that is intended to be ingested, and is not represented to be used as a conventional Food or as a sole item of a meal or the diet.
S. "
1. articles recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them;
2. articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or other animals;
3. articles (other than Food) intended to affect the structure or any function of the body of humans or other animals; and
4. articles intended for use as a component of any article specified in Subsection (1), (2), or (3); but does not include devices or their components, parts, or accessories.
T. "
U. "
V. "
W. "
X. "
Y. "
Z. "
AA. "
BB. "
CC. "
DD. "
EE. "
FF. "
GG. "
HH. "
II. "
JJ. "
KK. "
LL. "
MM. "
NN.
OO. "
PP. "
QQ. "
RR. "
A. Offering to sell, selling, promoting or marketing a good or service with a Negative Option Feature in the following circumstances:
1. Where the good or service is or relates to a Cosmetic, Food, Dietary Supplement, or Drug;
2. Where the good or service is or relates to an Add-On good or service; or
3. Where the good or service is advertised, marketed, or offered for sale both (i) through an Affiliate Program; and (ii) as either "free," "risk free," a "trial," a "sample," a "bonus," or a "gift," or using the phrase "no obligation" or any other words, depictions, or illustrations that denote or imply the absence of an obligation on the part of the recipient of the offer to affirmatively act in order to avoid charges. Provided, however, that this Section I.A.3 does not apply to (1) Persons providing entertainment streaming services with annual net revenues over $10 million; or (2) internet service providers (ISPs) or telephone service providers with annual net revenues over $10 million.
B. Offering to sell, selling, promoting or marketing the following goods or services:
C. Listed on the Mastercard Member Alert to Control High-Risk Merchants (MATCH) list for any of the following reasons: excessive Chargebacks or fraud, fraud conviction, laundering, identification as a Questionable Merchant per the Mastercard Questionable Merchant Audit Program, merchant collusion, illegal transactions, or identity theft.
A. Making, or assisting others in making, directly or by implication, any false or misleading statement in order to obtain Payment Processing services, including but not limited to false or misleading statements about the geographic location, name, identity, or corporate form of the Merchant or Seller;
B. Failing to disclose to an Acquirer or other financial institution, service provider, Payment Processor, ISO, or other entity that enables a Person to accept payments of any kind any material information related to a Merchant Account including, but not limited to, (a) the identity of any owner, manager, director, or officer of the applicant for or holder of a Merchant Account, and (b) any connection that such Person knows or should know exists between an owner, manager, director, or officer of the applicant for or holder of a Merchant Account and any Person who, for a reason related to excessive Chargebacks or fraud, identification as a Questionable Merchant per the Mastercard Questionable Merchant Audit Program, merchant collusion, illegal transaction, or identity theft, had a Merchant Account terminated by a Payment Processor or a financial institution, or has been fined or otherwise disciplined in connection with a Merchant Account by a Payment Processor or a financial institution; and
C. Engaging in any tactics to avoid fraud and risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system, including, but not limited to:
1. Using or allowing shell companies or nominees (including nominee owners, officers, or managers) to obtain Merchant Accounts to avoid fraud and/or risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system;
2. Balancing or distributing sales transaction volume or sales transaction activity among multiple Merchant Accounts or merchant billing descriptors to avoid fraud and/or risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system; or
3. Splitting a single sales transaction into multiple smaller transactions to avoid fraud and/or risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system;
D. Causing or allowing a sham sales transaction, including Microtransactions or sales transactions by a Merchant or Seller to itself.
A. Misrepresenting, directly or by implication, any material aspect of the performance, efficacy, nature, or central characteristics of any goods or services;
B. Misrepresenting, directly or by implication, any material aspect of the nature or terms of any refund, cancellation, exchange, or repurchase policies;
C. The unauthorized debiting or charging of consumer bank or credit card accounts; or
D. Any deceptive, unfair, or abusive act or practice prohibited by Section 5 of the FTC Act.
A. Obtaining from each prospective High Risk Client, including the principal(s) and controlling Person(s) of the entity, any Person(s) with a majority ownership interest in the entity, and any corporate name, trade name, fictitious name or aliases under which such Person(s) conduct or have conducted business:
1. A description of the nature of the prospective High Risk Client's business, including describing the nature of the goods and services sold and methods of sale, for which the prospective High Risk Client seeks Payment Processing services;
2. The name of the principal(s) and controlling Person(s) of the entity, and Person(s) with a majority ownership interest in the entity;
3. A list of all business and trade names, fictitious names, DBAs, and Internet websites under or through which the prospective High Risk Client has marketed or intends to market the goods and services for which the prospective High Risk Client seeks Payment Processing services;
4. Each physical address at which the prospective High Risk Client has conducted business or will conduct the business(es) identified pursuant to Subsection (1) of this Section V.A;
5. The name and address of every Acquirer, originating depository financial institution (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions to such prospective High Risk Client), and Payment Processor used by the prospective High Risk Client during the preceding two years, and all merchant identification numbers used by any such banks or Payment Processors in connection with the prospective High Risk Client;
6. The prospective High Risk Client's past Chargeback Rate and Total Return Rate (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions) for the preceding three (3) months, and estimates of future Chargeback Rates and Total Return Rates (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions); 7. The names of trade and bank references; and
8. Whether the prospective High Risk Client, including the principal(s) and controlling Person(s) of the entity, any Person(s) with a majority ownership interest in the entity, and any corporate name, trade name, fictitious name or aliases under which such Person(s) conduct or have conducted business, has ever been:
B. Taking reasonable steps to assess the accuracy of the information provided pursuant to Section V.A of this Order, including but not limited to: reviewing the Internet websites used by the prospective High Risk Client to market its goods or services; obtaining and reviewing copies of monthly Payment Processing statements issued by any bank, ISO, Sales Agent, Acquirer, or Payment Processor used by the High Risk Client during the preceding three (3) months; obtaining and reviewing a representative sample of current marketing materials for each good or service related to the offer for which Settling Defendants would provide the prospective High Risk Client with Payment Processing, ISO, or Sales Agent services. The purpose of such steps is to determine whether the prospective High Risk Client is engaged in any of the following acts or practices, in which case Settling Defendants shall not provide Payment Processing or act as an ISO or Sales Agent for the prospective High Risk Client:
1. Failing to clearly and conspicuously disclose all products and services that are sold in conjunction with the offered product or service, and the total cost to purchase, receive, or use, any products or services that are the subject of the sales offer;
2. Misrepresenting any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of the sales offer;
3. Failing to clearly and conspicuously disclose all material terms and conditions of an offer;
4. Misrepresenting, expressly or by implication, any material aspect of the prospective High Risk Client's refund, cancellation, exchange, or repurchase policies; and
5. Causing billing information to be submitted for payment without the customer's express authorization.
A. Failing to monitor the sales activity of all current Clients to identify Clients that should be designated as High Risk Clients requiring additional screening pursuant to Section V of this Order, and for newly-designated High Risk Clients, failing to complete the reasonable screening process described in Section V of the Order within a one month period;
B. Failing to monitor each High Risk Client's transactions to determine whether the High Risk Client is engaged in practices that are deceptive or unfair in violation of Section 5 of the FTC Act. Such monitoring shall include, but not be limited to, regularly reviewing High Risk Clients' Internet websites from an IP address that is not associated with Settling Defendants, regularly reviewing each High Risk Client's Chargeback Rates, Total Return Rates (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions), and reasons provided for these rates, as well as examining any unusual or suspect transaction patterns, values, and volume;
C. Failing to calculate and update at least on a monthly basis for each High Risk Client the Chargeback Rate and Total Return Rate (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions). For any Client with multiple processing accounts, the calculation of the Chargeback Rate and Total Return Rate shall be made for each of the High Risk Client's individual processing accounts, and in the aggregate for each High Risk Client;
D. Failing to immediately stop processing sales transactions and, as soon as practical but in no more than 5 days, close all processing accounts for:
1. Any Covered Client whose Total Return Rate exceeds two and one-half percent (2.5%) and whose total number of ACH Debit or RCPO returned transactions with the Payment Processor in any month exceeds fifty (50) transactions;
2. Any Covered Client whose monthly Chargeback Rate exceeds one percent (1%) and whose total number of Chargebacks with the Payment Processor exceeds fifty (50) in two of the past six months; and
3. Any Covered Client that Settling Defendants know or should know is engaged in tactics to avoid fraud and risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system, including, but not limited to, using shell companies or nominees (including nominee owners, officers, or managers) to obtain Merchant Accounts, balancing or distributing sales transaction volume or sales transaction activity among multiple Merchant Accounts or merchant billing descriptors, splitting a single sales transaction into multiple smaller transactions, or causing sham sales transactions, including Microtransactions, or sales transactions by a Merchant or Seller to itself;
E. Failing to immediately conduct a reasonable investigation of the cause of Total Return Rate (if Settling Defendant proposes to provide Payment Processing services for ACH Debit or RCPO transactions) or Chargeback Rates (a reasonable investigation includes, but is not limited to: taking reasonable steps to verify and update the truth and accuracy of information gathered in compliance with Section V of this Order and any other advertising of the High Risk Client; confirming that the High Risk Client has obtained required consumer authorizations for the transactions; contacting Better Business Bureaus to gather detailed information, including complaints and other relevant information, regarding the High Risk Client; reviewing from an IP address that is not associated with Settling Defendants the Internet websites used by the High Risk Client to market its goods and services; searching publicly available sources for legal actions taken by the Commission or other state or federal law enforcement agencies against the High Risk Client; and conducting "test" shopping to determine the High Risk Client's sales practices, where possible) for:
1. Any High Risk Client, excluding Covered Clients, whose Total Return Rate exceeds two and one-half percent (2.5%) and whose total number of ACH Debit or RCPO returned transactions with the Payment Processor in any month exceeds fifty (50); and
2. Any High Risk Client, excluding Covered Clients, whose monthly Chargeback Rate with the Payment Processor exceeds one percent (1%) and whose total number of Chargebacks exceeds fifty (50) in two of the past six months;
F. Failing to stop processing sales transactions and close all processing accounts for any High Risk Client investigated pursuant to Subsection 0, above, within 60 days of commencing the investigation, unless Settling Defendants draft a written report establishing facts that demonstrate, by clear and convincing evidence, that the High Risk Client's business practices related to the offer(s) for which Settling Defendants provide Payment Processing are not deceptive or unfair in violation of Section 5 of the FTC Act;
G. Failing to immediately stop processing sales transactions and close all processing accounts for any High Risk Client that Settling Defendants know or should know is engaged in tactics to avoid fraud and risk monitoring programs established by any financial institution, Acquirer, or the operators of any payment system, including, but not limited to, using shell companies or nominees (including nominee owners, officers, or managers) to obtain Merchant Accounts, balancing or distributing sales transaction volume or sales transaction activity among multiple Merchant Accounts or merchant billing descriptors; splitting a single sales transaction into multiple smaller transactions, or causing sham sales transactions, including Microtransactions, or sales transactions by a Merchant or Seller to itself.
A. Judgment in the amount of three million five hundred thousand dollars ($3,500,000) is entered in favor of the Commission against Settling Defendants, jointly and severally, as equitable monetary relief.
B. Settling Defendants are ordered to pay to the Commission three million five hundred thousand dollars ($3,500,000). Such payment must be made within ten (10) days of entry of this Order, or by December 31, 2019, whichever is later, by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.
C. Settling Defendants relinquish dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and may not seek the return of any assets.
D. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the Commission to enforce its rights to any payment or monetary judgment pursuant to this Order, such as a nondischargeability complaint in any bankruptcy case.
E. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes.
F. Settling Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Numbers or Employer Identification Numbers), which Settling Defendants must submit to the Commission, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701.
G. All money paid to the Commission pursuant to this Order may be deposited into a fund administered by the Commission or its designee to be used for equitable relief, including consumer redress and any attendant expenses for the administration of any redress fund. If a representative of the Commission decides that direct redress to consumers is wholly or partially impracticable or money remains after redress is completed, the Commission may apply any remaining money for such other equitable relief (including consumer information remedies) as it determines to be reasonably related to Settling Defendants' practices alleged in the Complaint. Any money not used for such equitable relief is to be deposited to the U.S. Treasury as disgorgement. Settling Defendants have no right to challenge any actions the Commission or its representatives may take pursuant to this Subsection.
A. Failing to provide sufficient customer information to enable the Commission to efficiently administer consumer redress. If a representative of the Commission requests in writing any information related to redress, Defendants must provide it, in the form prescribed by the Commission, within 14 days; and
B. Disclosing, using, or benefitting from customer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a customer's account (including a credit card, bank account, or other financial account), that any Settling Defendant obtained prior to entry of this Order in connection with providing Payment Processing services for the Apex Enterprise.
Provided, however, that customer information may be disclosed to the extent requested by a government agency or required by law, regulation, or court order.
A. Each Settling Defendant, within 7 days of entry of this Order, must submit to the Commission an acknowledgment of receipt of this Order sworn under penalty of perjury.
B. For 5 years after entry of this Order, Individual Defendant Mark Moskvins for any business that he, individually or collectively with any other Settling Defendant, is the majority owner or controls directly or indirectly, and the Corporate Defendant, must deliver a copy of this Order to: (1) all principals, officers, directors, and LLC managers and members; (2) all employees, agents, and representatives having managerial responsibilities for conduct related to the subject matter of the Order; and (3) any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting. Delivery must occur within 7 days of entry of this Order for current personnel. For all others, delivery must occur before they assume their responsibilities.
C. From each individual or entity to which a Settling Defendant delivered a copy of this Order, that Settling Defendant must obtain, within 30 days, a signed and dated acknowledgment of receipt of this Order.
A. One year after entry of this Order, each Settling Defendant must submit a compliance report, sworn under penalty of perjury:
1. Each Settling Defendant must: (a) identify the primary physical, postal, and email address and telephone number, as designated points of contact, which representatives of the Commission may use to communicate with Settling Defendant; (b) identify all of that Settling Defendant's businesses by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; (c) describe the activities of each business, including the goods and services offered, the means of advertising, marketing, and sales, and the involvement of any other Settling Defendant (which Individual Defendant Mark Moskvins must describe if he knows or should know due to his own involvement); (d) describe in detail whether and how that Settling Defendant is in compliance with each Section of this Order; and (e) provide a copy of each Order Acknowledgment obtained pursuant to this Order, unless previously submitted to the Commission.
2. Additionally, Individual Defendant Mark Moskvins must: (a) identify all telephone numbers and all physical, postal, email and Internet addresses, including all residences; (b) identify all business activities, including any business for which such Settling Defendant performs services whether as an employee or otherwise and any entity in which such Settling Defendant has any ownership interest; and (c) describe in detail such Settling Defendant's involvement in each such business, including title, role, responsibilities, participation, authority, control, and any ownership.
B. For 10 years after entry of this Order, each Settling Defendant must submit a compliance notice, sworn under penalty of perjury, within 14 days of any change in the following:
1. Each Settling Defendant must report any change in: (a) any designated point of contact; or (b) the structure of any Corporate Defendant or any entity that Settling Defendant has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Order, including: creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order.
2. Additionally, Individual Defendant Mark Moskvins must report any change in: (a) name, including aliases or fictitious name, or residence address, or (b) title or role in any business activity, including any business for which such Settling Defendant performs services whether as an employee or otherwise and any entity in which such Settling Defendant has any ownership interest, and identify the name, physical address, and any Internet address of the business or entity.
C. Each Settling Defendant must submit to the Commission notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such Settling Defendant within 14 days of its filing.
D. Any submission to the Commission required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: "I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: _____" and supplying the date, signatory's full name, title (if applicable), and signature.
E. Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Order must be emailed to DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. The subject line must begin: FTC v. Apex Capital Group, LLC, et al.
A. accounting records showing the revenues from all goods or services sold;
B. personnel records showing, for each person providing services, whether as an employee or otherwise, that person's: name; addresses; telephone numbers; job title or position; dates of service; and (if applicable) the reason for termination;
C. records of all refund and Chargeback requests made with respect to High Risk Clients, whether received directly or indirectly, such as through a third party, and any response;
D. documents sufficient to show monthly and yearly Chargeback and refund amounts both by dollar amounts and number of transactions; and
E. all records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Commission.
A. Within 14 days of receipt of a written request from a representative of the Commission, each Settling Defendant must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; appear for depositions; and produce documents for inspection and copying. The Commission is also authorized to obtain discovery, without further leave of court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69.
B. For matters concerning this Order, the Commission is authorized to communicate directly with each Settling Defendant. Settling Defendants must permit representatives of the Commission to interview any employee or other person affiliated with any Settling Defendant who has agreed to such an interview. The person interviewed may have counsel present.
C. The Commission may use all other lawful means, including posing, through its representatives as consumers, suppliers, or other individuals or entities, to Settling Defendants or any individual or entity affiliated with Settling Defendants, without the necessity of identification or prior notice. Nothing in this Order limits the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.
