Two Men Arrested for Opening 7,000 Credit Cards and Fraudulently Earning 790M Points
A grand jury has indicted two men, one from Ocean County, New Jersey, and the other from Utah, with carrying out a fraudulent scheme to obtain credit cards in the names of third parties, make purchases on the cards to generate rewards points, monetize the points, and cancel the purchases.
The timeline of this case, which involves accounts between 2014 and 2016, is in line with the creation of the RAT team. The whole case can give you a perspective on the types of fraud that credit card companies might have to deal with and reasons for some of their policies.
The Scheme
The two men, Aharon Lev and Timothy Gibson, were involved in recruiting individuals to give him their personal information, such as names and Social Security numbers, which were used to open numerous small-business accounts in their names with the victim credit card company. The credit card company seems to be American Express. The recruited individuals were paid a flat fee for every account that was opened in their name.
The credit cards were used to make purchases that generated rewards points, which could be redeemed for frequent-flyer miles with various airlines. Once the points were issued, Lev cancelled the purchases and sold the points to Gibson, who resold them to third parties for use as miles to purchase airfare. They also often closed account before they accrued annual fees or other expenses.
Lev and his associates concealed from the recruited individuals that their employment and income would be falsified in applications, that their personal information would be used in conjunction with false information to sometimes open as many as 99 accounts and that most purchases made with the credit card opened in their names would be canceled, rather than paid for.
The two individuals even talked about putting some “real spend” on the cards so the credit card issuer wouldn’t claw back the points. But Lev assured Gibson that “as long as we use the points fast, real spend is not an issue.” One way to use the points fast, was to expedite the posting of points in the account. They would do this by calling the company, posing as the cardholder, and asking for points to be posted before payment was due since they needed to use them to pay for honeymoons or some other important events.
$8M Damage and 790M Points
Over two years, from 2014 to 2016, the scheme cost the credit card company more than $8 million in fees paid to the airlines for acceptance of points for miles. Aharon Lev opened in total more than 7,000 credit card accounts. in the names of more than 1,500 people. These activities resulted in 790 million Membership rewards points.
You can read the full indictment details here.
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