26 Sham Merchant Accounts, 78 Months in Prison: Credit Card Laundering for a Debt Relief Telemarketer

What happened

On July 8, 2021, the U.S. Attorney's Office for the Southern District of New York, part of the Department of Justice (DOJ), announced the arrest of Steven Short, 44, of Tampa, Florida, the former head of E.M. Systems & Services, LLC and affiliated companies (E.M. Systems). A superseding indictment also contained charges previously announced against Brandon Becker, 50, of Los Angeles, the former CEO of CardReady, LLC.

The alleged scheme

According to the indictment:

• From about 2012 through 2015, E.M. Systems generated over $19 million from thousands of customers who received cold calls promising to reduce their debt in exchange for fees of up to $1,495.
• The operation drew hundreds of complaints and requests for millions of dollars in refunds and chargebacks.
• CardReady, a Los Angeles sales agent in the card processing industry, submitted merchant applications to an independent sales organization (ISO), which referred accounts to a payment processor and a bank.
• Under the deal, CardReady kept about one-third of E.M. Systems' card sales in exchange for access to processing.
• Bank guidelines prohibited processing for "debt consolidation" and "interest rate reduction" services.
• To conceal E.M. Systems as the true merchant, Short, Becker and others created about 26 sham merchant companies, each headed by a paid "signer" who typically had no business of their own.
• When the processor closed accounts for excessive chargebacks, CardReady quickly replaced them with new sham accounts.

Charges

Short was charged with conspiracy to commit wire fraud and bank fraud, and bank fraud. Becker was charged with those counts plus conspiracy to make false statements to a bank and wire fraud. Several counts carry a maximum of 30 years in prison. The Federal Bureau of Investigation (FBI) investigated, and the Federal Trade Commission (FTC) assisted. These are allegations.

Update: plea and sentence

On August 16, 2022, the U.S. Attorney's Office announced that Short pleaded guilty to one count of conspiracy to commit wire fraud and bank fraud before U.S. District Judge Loretta A. Preska, with sentencing scheduled for December 7, 2022.

On May 2, 2023, the office announced that Judge Preska sentenced Short to 78 months in prison. According to that release, the scheme took more than $19 million from more than 19,000 customers. The U.S. Attorney said Short charged fees of up to $1,495 while guaranteeing to reduce debt and lower interest rates, but "generally sent them cookie-cutter booklets with ordinary budgeting advice."

Why it matters

At its core, this case is about payment processing access. Debt relief and interest rate reduction telemarketing are high-risk categories, and many banks prohibit them. Splitting a merchant's charges across many accounts to hide its identity and its chargeback rate is a practice often called "credit card laundering." The Telemarketing Sales Rule (TSR) separately prohibits it in connection with telemarketing.

The TSR also restricts debt relief services. Telemarketers generally may not collect fees for debt relief until they have actually settled or changed at least one of the customer's debts.

Practical steps

• Process only under your own merchant identity.
• Do not use nominee "signers" for merchant accounts.
• Monitor chargebacks as a compliance signal, not just a cost.
• For debt relief offers, confirm your fee structure meets TSR advance-fee rules.