Defendant Banned from Internet Businesses that Access Consumers’ Bank Accounts
Defendants in an operation that the Federal Trade Commission alleged stole millions of dollars from consumers by making unauthorized charges and debits to their bank accounts have reached settlement agreements with the FTC.
In Operation Short Change – a July 2009 crackdown on scammers taking advantage of the economic downturn to bilk vulnerable consumers through a variety of schemes – the FTC announced a complaint against Classic Closeouts LLC, its principal Daniel Greenberg, and several other defendants. According to the complaint, Greenberg made unauthorized charges and debits to consumers’ accounts months or years after they bought low-cost clothing or household goods from the Classic Closeouts website.
Under the settlement Greenberg is banned from owning, controlling, or consulting for any Internet-related business that handles consumers’ credit card or debit card accounts. He also is prohibited from making unauthorized charges to consumers’ accounts, making false or misleading statements while selling any goods or services, and using any false or assumed name, including an unregistered, fictitious company name, in his business dealings.
The settlement with Greenberg also imposes a judgment of $2.08 million. He recently filed for bankruptcy, and the judgment will be suspended – upon his surrender of certain personal and household items and the fulfillment of other conditions related to the bankruptcy proceeding – due to his inability to pay. If it is determined that the financial information he gave to the FTC was untruthful, the full amount of the judgment will become automatically due.
The defendants made unauthorized charges and debits to consumers’ accounts ranging from $59.99 to $79.99, and charged some accounts multiple times, according to the FTC complaint. Consumers who attempted to contact the defendants to contest the charges received no response. Many consumers also disputed the charges with their credit card company or bank. By doing so, some consumers initially succeeded in having the charges credited back to their accounts. However, in many instances, the defendants contested these disputes, falsely claiming that consumers had chosen to join the Classic Closeouts “frequent shopping club.” As a result of these false statements, financial institutions reinstated the fraudulent charges to consumers’ credit card and bank accounts.
At a court hearing in June 2009, the court issued a temporary halt to the alleged illegal conduct of defendant Classic Closeouts, LLC, as well as an asset freeze and a receivership. In July 2009, the FTC amended its complaint and named two more individuals – Jonathan Bruk and Stephanie Greenberg – along with several companies, as defendants. In December 2010, the FTC again amended its complaint to make Stephanie Greenberg a “relief defendant,” alleging that she had received significant sums of money from the defendants’ unlawful scheme.
The Commission vote authorizing the staff to file stipulated final orders against Daniel Greenberg, Jonathan Bruk, and Hazen NY Inc. was 5-0. The Commission vote to authorize the staff to file the December 2010 amended complaint and stipulated final order against Stephanie Greenberg was 4-1, with Commissioner J. Thomas Rosch dissenting. The U.S. District Court for the Eastern District of New York entered stipulated final orders on December 13, 2010. Also on that date, the court granted the FTC’s motion for a default judgment against the remaining corporate defendants owned by Daniel Greenberg. – Source
You can read the complaint and final judgment here.