The Chickens Have Come Home To Roost For Credit Card Farmers; Indicted For Fraudulently Obtaining 790 Million AMEX Points

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I saw this indictment several days ago and have been sitting on it. But ultimately, I think it’s worth writing about, as this is yet another sad and cautionary tale of what not to do.

I’ve written about credit card farms several times, including a deep dive in this March 2017 post, as part of this February 2019 post with a PSA not to allow other people to swipe your credit cards, and in passing in this September 2019 post on what you should never do with your credit or credit cards. I’ve been sounding the alarm about the farming practice since at least this June 2014 post, which resulted in me being contacted by someone who said their very expensive and high class lawyers would shut down DansDeals if I didn’t delete the post.

In short, the credit card signup farms would promise up to $10,000 for handing over your social security number and letting them have their way with your credit. I shared horror stories of people being left with bills, not being paid, and having their mileage accounts frozen, and their credit ruined.

I wrote in 2017,

“It seems to be a common practice for some of the farms to promise to use only regular spending but then proceed to generate fake spending to earn signup bonuses. The farms are not accurately representing the potential risks and fraud involved that are being committed in the victim’s name. That is simply irresponsible and inexcusable.

One DDF member sent me information about farms using even more nefarious methods to multiply the points balances of their victims before cashing out, and leaving victims with massive negative balances that can affect their ability to get credit cards in the future. One of the farmers even bragged to him about how much he abuses his victims accounts, as if it’s all just one big game. If the account holder knew the level of fraud that was being committed in their name they would likely have never allowed it, but they’re simply not informed of what’s actually going on.”

And sure enough, the chickens are coming home to roost for some of the farmers. A grand jury has indicted 2 men that operated one of these credit card farms for wire fraud, conspiracy to commit wire fraud, and aggravated identity theft.

The indictment never mentions AMEX, but it seems obvious to me from the case details that they are the ones that brought the case forward to prosecutors.

The indictment says that they recruited people, called straw cardholders, by paying them to open credit cards in their name. This farm in particular was active from August 2014 through at least May 2016. The farmers would spend to meet the signup bonus threshold, transfer the points, refund the original purchase, and then cancel the card before the annual fee was due.

The indictment also says that the straw cardholders were deceived as they weren’t told that there would be fraud involved. It seems that the government won’t be going after individual cardholders in court in this particular case, at least unless they have reason to suspect that the individuals knew there would be fraud involved.

It’s noted that in 2015, one of the farmers emailed the other that they should start using real spend as credit card companies were cracking down on fake or manufactured spend. It’s noted in the complaint that the intention behind that was to make it more difficult for AMEX to detect the fraud, though more likely the intent was just to ensure that points were awarded. At any rate, they kept using fake spending as they figured they would get the points faster than AMEX could claw them back.

The farmers would also make up excuses in the cardholders’ names to get AMEX to post their pending points, such as for a honeymoon or bereavement need.

In the end, these particular farmers opened over 7,000 cards for more than 1,500 straw cardholders, racking up more than 790 million AMEX points. Those points were transferred into miles, which cost AMEX about $8.2MM.

It’s rare to see what airline miles cost the credit card company, and each airline likely has its own rate. But in this case we can calculate an average cost to AMEX of 1.04 cents per mile based on the loss numbers. That’s somewhat lower than I’d expect, though it’s hard to say without knowing exactly which airlines the points were transferred to.

Is this case just the tip of the iceberg? Would the case have gone forward if all the spending was legitimate?

It’s certainly no wonder that banks have gotten much stricter about opening credit cards over the past few years!

But the painful lessons here are obvious. Don’t try to scam the system or you’ll face jail time. And don’t hand over your credit information or credit cards to anyone else for any price.

All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals.

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It’s amazing that there are people so stupid as to fall for these kind of scams…and people with credit scores good enough to actually get approved for cards with decent signup bonuses! In a lot of ways this is worse than falling for Nigerian prince email scams. It just proves there is a sucker born every minute.

Or ppl are desperate for money….bec they failed to do proper histadlus……

“It seems that the government won’t be going after individual cardholders in court in this particular case, at least unless they have reason to suspect that the individuals knew there would be fraud involved.”

The cardholders gave farmers their SSN’s, knowing full well that the farmers would open cards pretending to be someone else.

Is that not fraud in it of itself?

Maybe they didn’t know the *extent* of the fraud, but even the most ignorant and plausibly deniable cardholder had to realize what he was participating in had a non-zero amount of fraud involved.

Dan did a great service. You defenders of these scam rat hillul HaShem people would insist a ham sandwich was kosher if you could find some gullible yid to buy it. Tshuva is the answer.

Dan, what about doing a buying group?

IMHO its Legal (light grey) but ethically wrong and total lack of emuna that Hashem can provide you with a living (as decided on RH) w/o resorting to shtick.

As far as not having enough emunah, my understanding is that there are levels of emunah and hishtadlus. The same way for Yosef asking the saar to remind pharoah about him was too much hishtadlus while for us would be too little. For you on your level of emunah, it may be too much hishtadlus. But for those not holding at your level yet, i would say that it would be classified as hishtadlus and not lack of emunah. Now whether it is unethical is a discussion, which i don’t fully hear. Amazon, for example, is pretty ‘smart,’ and knows how to follow patterns. They see every Lakewooder buying ipads every time they are at 249.99. If it mattered to them they would close accounts the same way the have closed accounts for other insignificant things that bothered them. So i would leave that as very argueable.
Hatzlocha
PS thanks Dan for all my wonderful vacations and free rentals!!

If you can’t do the time then don’t do the crime. Why is everyone jumping on Dan instead of these crooks? Get your priorities straight.

All the self-righteous indignant ppl screaming here LH are highly suspect.
#1 rule of L’toeles is to warn others of potential damage which this article clearly does.
Ask yourself before commenting; Is it ur complex that you also play shtick?
LH and Chillul hashem 2 most abused words in the Jewish Lexicon.

Exactly!!!
Sounds like same people defending a crook will defend the looters!
It’s good to be waned about these things in case they come my way!

but the credit card companys earns on each transaction 1-2 %

@Dan and what about purchasing for buying groups? It’s real cc spending but banks don’t like it…

Hey Dan,

Maybe its time to mark the articles you linked above as “DEAD” or “EXPIRED” NOW. :)

Complete agreement with you about the moral issues over here. But can you please explain what exactly is the fraud here? I think a lot of people including myself are not understanding that part. Amex awarded the points, they could have classified refundable airline tickets as non eligible spending.
Would be grateful if you can clarify

If you read the Indictment Statement it sounds more like AMEX complaining that it’s not fair then a statement of indictment.

The defense attorneys here are going to have a very easy case.

Seems like none of these charges are actually for what they did wrong. The people gave them their info and agreed to the signups and received the $10k or whatever they were promised so not much identity theft there. And wire fraud, not sure where that comes in. They took crazy advantage and acted disgusting and maybe cheated the bank at worst which is a civil case and not criminal so I don’t really get what this is all about.???

thats’s what EVERYONE here is saying, but some people insist on publicly posting the guy’s name. lets hope he gets a good lawyer. maybe Dan will donate for his cause as part of his “kaparah” for hurting him lol

I’d like to learn more about that. How did Dan “hurt him”?

Don’t see this as a HUGE win for Amex, complaint looks weak. Let’s see what they come up with. They need to prove all they write in the complaint, am sure it will be hard for them.

Amex obviously complained to Feds. The FBI doesn’t randomly listen in to calls and decide if credit card is earning points against company T&C.
Dan, do u have a personal agenda here against another frum person, just so u can say “guys, I told you so”
Seriously, why don’t you remove the link and some of the numbers? I (and a lot of commentators here) thought you were better than that.

c’mmon, ur smarter than that:
firstly the obvious: u def gotta remove the link
secondly, u must delete the numbers (write millions, not how many)

there will always be some who will try hard to find the details anyway- and that’s your own cheshbon/risk (i’m sure u’ll ask a rav before you make a decision of this gravity)

just realize that there is a frum family that’s suffering more because you are “righteously” helping everyone with useless details. I wouldn’t want to be in your shoes now. hope u take down all the extra info immediately- its not “shev v’al taaseh” as u are the person who posted this – u really will shock me if u continue to stubbornly keep the link up

Did the farmer worry about his reputation? Did he try to protect his wife and kids? DO I or Dan have to work harder than he did to protect them from what he did?

Yeah. It’s a tad bit harder to negotiate a favorable outcome/settlement with the Feds than a bank….

Btw, this case exposes the sickness of the justice system in the USA. The indictment is for 4 charges (conspiracy, mail wire, and identity theft) which are all for the same exact thing. They are stacking various ridiculous nebulous charges that can lead to 70 years behind bars for a gray area minor white collar offense. They are doing this to force them to cut a deal, knowing they can’t risk a stupid jury convicting and a judge throwing the book at them as a punishment for not taking a deal. This is how the feds work. There’s nobody who is safe from them, even the self righteous people who think they never played shtick in their lives, and especially not those who do. Instead of writing lashon hara posts blasting these people, how about some support and outrage over this travesty of justice.

You can sit just as easily and be forced to forfeit every penny to your name, sweetie pie. You’re in denial if you’re not aware of that. I don’t have to go into details, just like you shouldn’t have here. Anyone with the emotional objectivity not forcing them into the cognitive dissonance necessary for a survival instinct would be well aware of this. Don’t claim the moral high ground and think that’s why you’re safe, even if it’s more comfortable. Do teshuva, give tzedaka, and daven. May you have a lot of nachas from your children, and only menuchas hanefesh and harchavas hadaas. I give you a bracha that your chickens never come home to roost.

+1000000

TOTALY AGREE!!
Dan, look at Enzo’s comment above.
Dan, people respect you, so you have should some level of responsibility, I googled the guy and found out he’s married w kids. Shame on you for the direct link. Everyone would trust u about the story even if u deleted the link and the “google-able” details.

Anonymous, are you THAT guy by any chance?

Shame on you for googling the guy to find out details about him!

anonymous, Oh, I didn’t know! Because he’s married with kids he *must* be innocent. Any victims can take a hike, because they were scammed by someone with a wife and kids. Oh my goodness.

Do we know if there were any victims aside from AMEX?

“Yes, I’ve spoken to many of them. Amazing how people will defend THOSE THAT CHEATED THEIR FELLOWS.”

The fact that there are farmers who have stolen, does not in any way give you the right to slander this guy. That’s exactly what motzei shem rah is. Nowhere in the complaint does it say that he stole. And no one ever commented and said that this particular farmer didn’t pay them as promised.

I am proud that you removed his name.

I’m not defending anyone on a moral scale, rather, i’m pointing out that the indictment doesn’t have real legal grounds. Lets see how this plays out.

Anonymous, wishing you good luck on the defense team in court.

Daven for yidden in tzaar. Don’t gloat. I don’t have to go into details, but אין צדיק בארץ, especially some people who may have encouraged millions of dollars in credits from refunded charges. Nothing disappears with a עין רואה ואוזן שומעת וכל דברים בספר נכתבים, and nobody should think of themselves as invincible. Daven for אחינו בני ישראל הנתונים בצרה ובשביה. המקום ירחם עליהם ויוציאם מצרה לרווחה ומאפילה לאורה ומשיבעוד לגאולה.

I dont daven for Rishaim or those that dont have Yiras shemayim

Can’t believe Jewish name was referenced via link. Overall the article is l’toeles, but no need to mention name. Thus, according to every Rabbi, this is pure lashon hara! Pls remove the link to Indictment Statement at once!

Did you ask every Rav? I absolutely stand with Dan that he mentioned the alleged suffering of victims. Let the court perform its duties with a fair and just case.

“Alleged” suffering is not l’toeles on a past sin committed.

Could you elaborate on the amount AMEX paid the airlines per mile? If AMEX is spending 1.04 cents per point and we’re getting, what, 1.5-2 cents worth of travel per mile, how is it that the airlines are making money hand over fist from CC rewards programs? Thank you.

Does 790m Amex points equate to 790m miles? The math doesn’t seem right

No. Over the course of 2 years and ~800mm MR, probably a good portion of them were transferred with transfer bonuses that range from 10-30% etc.

Also might want to add that estimated bonus range into the 1.04cpp calculation. With bonuses its fairly unknowable because we don’t know the cost-share burden of those transfer bonuses.

Right. But are the full cost of the bonuses born 100% by the airline? I imagine not. That might be why sometimes you’ll have the same airline offering different transfer bonuses across cc loyalty programs simultaneously.

Dan, you write that “One of the farmers even bragged to him about how much he abuses his victims accounts, as if it’s all just one big game. If the account holder knew the level of fraud that was being committed in their name they would likely have never allowed it, but they’re simply not informed of what’s actually going on.”

I read everything thoroughly- It should be made clear that these particular individuals don’t have any complaints about cheating their clients.

Also, some of the complaint seems very unlikely to hold up in court, like the fact that they closed the accounts before the annual fees posted. The fraud charge also keeps going back and forth between:
— representing other people’s identity (with their permission- [so is it really illegal?]) and taking advantage of AMEX (by canceling charges- [who said that’s illegal even though its not nice]
—and making fictious small businesses- [amex says u can sign up for business cards even if u MAY start a business and they don’t have any requirements])

Lastly, do you really think AmEx kept track of all these guys’ points and calculated 8.2M as a legitimate loss. If they did, why didn’t they stop these guys, or did they?

Looks like Amex complained to the Fbi and they are throwing the book at these guys, hoping that they will settle for some prison and send a warning to all the farmers. However, if these guys fight hard with a decent lawyer, I doubt that they will be found guilty of these charges. I disagree with what they did, but don’t see real legal grounds here. Much is missing from the complaint, but I’m sure many of us will follow this case as it will become a precedent.

One more funny point: Looks like Amex didn’t want to be named on the case to avoid causing customers to be nervous about signup bonuses. Thanks to Dan, their cover has been blown. lol

interesting, cuz that would be #1 thing in the complaint, if it was true for these guys. seems like there were some ppl on the forums who were left holding the bag, but not from these guys. either way, you provided everyone here w/ enough info to look this up (as I did) and find identity of these guys, even if ur intentions r noble, u do need big shoulders to carry the L”H aspect, and you definitely shouldn’t make it seem like these particular guys fleeced their “clients” when all indications are that they didn’t. I think you def should take down some of the identifying details

Are you an attorney?

This will be worse than the Chiu brothers.

Why the charge of aggravated identity theft? Didn’t the people hand over their information willingly?

This post from dan and everyone is 100 percent lashon hará on a Jew I am sorry this should be taken down and stopped immediately . This is another yeshiva world type of junk.

how is this LH? Did the post even mention it’s a jew?

Correct, and taking advantage of flight glitches and Amazon errors is PURE GENEIVA…… this entire site should be shut down. Maybe let’s make a riot. Bash your computer screen now. (Maybe you should open Rolex.com before so you can steal the watch in the screen).

Dan is doing what he does every time. Warning people of scammers.
Maybe ask your Rav if a scammer is a Jew if you are allowed to warn other people about it.
BTW, nobody said the person was Jewish only you. So you are the one who spreading לשון הרע

Wow could face serious punishment, per the APP – “could spend the rest of his life in federal prison if convicted”.
“Each charge of wire fraud and conspiracy to commit wire fraud carries a maximum penalty of 20 years in prison, a $250,000 fine, restitution and forfeiture. Each charge of aggravated identity theft carries a mandatory sentence of two years in prison, to be served consecutive to any sentence on the wire-fraud and conspiracy charges, according to the U.S. Attorney’s Office.”

except that “[]who has left the United States for Israel, has been ordered to return home” so he’ll likely never make it to a US jail…

Sam, you are a jerk. I have several credit cards and I got tons of bonus points because of Dan. I have always paid off my bill every month regardless of the amount with a perfect credit history. I have saved tons of money because of Dan and I promote his website to all my friends.

Fake spending I get but Whats fraudulent about signing up for a credit account on somebody else’s behalf?

identity fraud?

If there’s consent, identity fraud shouldn’t be the issue. Not to say it’s right, though.

“on somebody elses behalf”. idiot

You can indict a ham sandwich. Doesnt look too serious. Lets see the criminal complaint.

Um, the link to the indicment states a Jewish name. Loshon Hara?
Even if its already well known and not LH according to letter of law, is it right?

It’s not Loshon Hara, I confirmed with a Rav

Maybe that “expensive and high class lawyer” is being paid with someone’s credit card. Gotta get someone a trip to Italy with points somehow:P

wow, wire fraud alone is a felony and can land them upwards of years in jail. I don’t agree with what they did but the charges seem a bit excessive

Thanks Dan for this important reminder to the community.

When this article (and others you have written on this topic) mentions “fake” spend, what exactly does that mean? That the purchases were later returned after the signup points were redeemed? If so that is just a blatant violation of every issuers’ T&C and is just asking for trouble. Just want to clarify what the bad behavior is that got them flagged so we can all make sure to avoid it even when using our own cards regularly, and to clarify the distinction between “fake” spend and “manufactured” spend.

Either way, it’s amazing to me that if they were going to do this they didn’t just meet the spend regularly to stay under the radar from what they were doing. Just unreal and very sad.

Quoting above

The farmers would also make up excuses in the cardholders’ names to get AMEX to post their pending points, such as for a honeymoon or bereavement need.’

The farmers would call the credit company on the phone, and say they are someone they weren’t ?

Isn’t that fraud on its own right ?

its not always the end of the world to hand your social over,like if your a american yungerman from beit shemesh with no plans ever to move back to america why not earn a few thousand bucks

for starters its fraud.

and is it really worth a few thousand bucks to not be able to do anything with your credit if you have to move to the USA for some unseen reason?

No, unless the fact that you live abroad means that you’re comfortable with picking up the tab for tens of thousands of dollars of someone else’s debt. Kinda short-sighted if you ask me.

Why put your wire through that? If you were single, you’d bring yourself down, and no one else. If you were diligent about the Chusson classes, hilchos nidah, then you’ll understand this is a shalom baylis issue. I’d recommend you avoid that trouble and potential marital strife.

Looks like you forgot the second s of your username.

Amex is located in New York and the indictment states that the “Credit card Company” is located in or around New York”.

So Dan, it seems that your right!

The biggest giveaway is that they had to repeatedly convince the issuer to move over the pending points to redeemable. Pretty sure only AMEX keeps the points in “pending” status for an extra billing cycle, every other issuer just posts the points immediately at the close of the statement. That problem definitely made it harder on these guys and meant they had to engage in a whole new area of fraud.

Citi and Chase are also both headquartered in NYC

Its dependent on where the company is incorporated not headquartered.

State of incorporation is irrelevant to identifying the subject credit card company in the indictment, which says “The “Credit Card Company” was headquartered in or around New York…”

Dan, thanks as always for keeping us informed of the types of scams out there

The best part of Dans deals is your balance between delivering good info, a good deal, and still being a honest erlich person.

Amein to that.

+1 YOUR HONESTY IS EVIDENT IN EVERY POST. I BELIEVE THAT IS WHY YOU HAVE SUCH A BIG AND LOYAL FOLLOWING!

Oh yes. Thank you Dan

Dan, you perpetuate the very offenses you wish to eradicate. Quit hawking sign up bonuses and then we’ll take you more seriously.

Why even respond to the troll?

Sam – why with all the hate going around do you feel the need to continue this trend?
Dan is a standup man who helps thousands (if not more) people every year, whether it’s by saving money on everyday purchases or helping people with their travel questions….
Please Sam show some respect and don’t bring that hate here.

No hate. Just disagreement. Kudos to Dan for approving my post. Dan does lots of great work. Don’t get me wrong. But let’s get real. Just like marijuana is a gateway drug, credit cards for sign up bonuses are a gateway to bad things and poor money management. I wish it weren’t so…

Sam, correct! Dan has mentioned it before; if one isn’t responsible or mature to pay the CC bill in full each month, it’s best to avoid any CC. That individual isn’t evil or dumb, he should take the route of paying for things in cash. Miles are worthless if you are sitting on thousands of dollars of CC debt that you cant pay back.

Sam, if you don’t have the personal discipline to not pay your balance in full, don’t play. For those of us with the discipline, this was and is a great opportunity.

Its not about personal discipline. Put a buring hot coal in from of a 2year old and see if he touches it….

Bikeguy was bringing personal discipline into the discussion about cc debt. For a 18 year old a cc is like a burning coal to a 2yo

Let’s ban violent movies and games, because it can give weak minded people wrong ideas. Let’s also make sure all women are veiled up, because anything else may tempt evil folks from committing crimes against them. Oh and driving should be illegal because there are bad drivers who get in road accidents. And the Internet should be banned too.

Amazing logic.

Take your negativity somewhere else. There’s a clear difference between defrauding credit card companies to the tune of some $8 Million and readers of DansDeals wishing to take advantage *legally* of published sign-up bonuses for personal use. If you can’t see that, I’d suggest new glasses.

Let’s the the important stuff out of the way: love the username.

Disclaiming that points can lead to bad stuff is akin to cigarette companies disclaiming lung cancer. Counter argument is that items used dangerously are dangerous. Cars can be used positively or not, so stop car sales? No.

But this blog is different. Ethics are thrown to wayside by showing people how to take advantage of loopholes. Couple that with Dan’s profits from credit card sign up bonuses.

“Couple that with Dan’s profits from credit card sign up bonuses.”
Now I see where you are coming from… Just a little jealousy – understandable human nature. Thank you Sam the man for clarifying that. I was getting worried that you really thought there was something wrong.

The big banks have full time accountants and lawyers to use loopholes to take advantage of you in all different ways, and we have a full time blog here on how to take advantage of them. As long as everything is truthful and legal, everyone should be ok. You don’t need to take a banks marketing intentions or their general bottom line into consideration when doing a signup or other promotion, just do everything truthful.

read the complaint before you make these type of claims.

That’s false, he totally does not. I sign up for credit cards to get the sign up bonus every so often. Absolutely nothing wrong with that. However, I wouldn’t allow OTHERS to do that on my name with my social, etc. That’s what he’s saying not to do.

Dan, why do you let hate posts through. No matter who they are directed at

Love your site. You’re doing a great job. Just a bit conflicted about where you stand. Maybe offer a free responsible credit card spending Zoom?

Ahh, the fine print.

Lol youre a clown. Youre gonna blame Dan for an adult not using a credit card responsibly? Any marginally intelligent person knows how credit card companies make their money. If you cant pay back the bill on time, dont use a credit card.

It’s not exactly buried; “a word of warning” is section 3 of 28 in Dan’s guide

Sam,

Shame is the name of your game.
You are a sham, like the pink producer of ham.
Making others look, like the evil you cook.
Waiting in the wings, to clip his success that stings.
High roads you talk, but at therapy you balk.
Time to check where you’ve turned, before you’re spurned.

Confused, yes. About where Dan stands, no. I denounce this jealous fellow and hope it won’t hinder Dan for being there for so many.

I thought it was great that you posted the criticism and responded in such a calm way. I did not share Sam’s sentiment, but maybe there are others that do. Better to address it than leave such people wondering.
I think the way you handled it is a testament to your integrity.

I appreciate that you allow this type of trolling, even though i completely disagree with the content. It gives you credibility that you don’t hide your detractors (of course we don’t know what you really hide ;)).

On the topic of LH its public and not being done to shame only as a PSA, Kudos! I would have kept the link up as well (too bad I’ll need to find it myself).

Let the hate comments thru. You do a fine job responding to the comments, and as long as anyone is not too nasty….everyone is entitled to his opinions…and sam is right about ppl buying on credit with no way of paying back

Sam, huh? The credit card companies advertise these for legitimate new cardholders to win their business and they like referral partners to to ‘hawk’ it as well. That is advertising for them. It’s win/win for all parties. The issue is when someone uses fraudulent spending. ‘Manufactured Spending’ is a grey area… but more towards white. It is legal, just can ruin it for everyone and I have seen Dan (after his early years) frown upon it. So I am not sure what ‘turns you off’ about him pushing this stuff? It is great for me to know what offers are out there for when I am ready for an option.

sign up bonuses is logit and I see nothing wrong with promoting that.

Sam, there’s nothing wrong with being smart about credit card signup offers. The banks do anything they can legally to make money off us (that’s their job) and we do the same to them legally (our job). Credit farming is actual fraud in many cases and at the very least clear abuse in others. There’s a major difference between taking full advantage of an offer for your benefit and actually abusing an offer.

Get a life, so many of us gain so much from honest dan. Thanks again dan