Trusting an online influencer she had met online came at a devastating price. For Lisa Smith (not her real name), a veteran Financial Services Officer at a credit union, the trouble started when a bariatric surgeon she followed online gave advice on how to make additional spending money.
His recommendation seemed simple enough: $750 monthly for 30 minutes of administrative work managing an LLC tied to health and beauty products
But what began as a desire to make some extra money on the side ended in professional ruin for her as she unwittingly became entangled in a sophisticated transaction laundering scheme.
Lisa had become a high risk merchant and she had no idea how it happened.
The IBO Scam: The Art Of Creating Ghost Companies
Lisa is not alone. Hundreds of innocent, well intentioned people are being ensared in a scheme that is promising them thousands of dollars for doing little more than helping merchants expand.
They are recruited to become straw owners of “ghost companies” that high risk merchants use to hide their own high risk activity. Those merchants often sell high risk merchandise like weight loss plans, unproven drugs, or questionable subscription services.
When their fraud and chargeback rates get too high, banks simply shut them off, effectively putting them out of business.
To solve this problem, unsuspecting people are recruited to become Independent Business Operators (IBO’s) that help those risky merchants and advertisers accept credit cards online so they can stay in business.
The scheme is marketed as a turnkey business opportunity requiring minimal effort – typically “about 30 minutes per month” of administrative work – for guaranteed monthly payments (usually $750 to $1,000).
The opaque recruiting advertisements online never exactly reveal how the scheme really works, rather they use terms like “merchant reseller”, or “help advertisers grow”, or “become an IBO”. And when a trusted “internet influencer” is backing the opportunity, most people will jump on it.
Here is an Youtube video advertising one of these programs online. “You will never regret this decision!” they claim.
She Became A High Risk Merchant, Her World Crumbled
For Lisa, the opportunity seemed perfect. She wanted extra income so she could add more value to her own life, but also provide for others too.
She started the program in 2021. It started of great and she received $750 just as the influencer had promised. It did not take much of her time – only 30 minutes each month. She was paired with an advertiser that sold health and beauty products. Everything was just perfect.
But, it was what was happening behind the scenes with her identity that would eventually make her world come crumbling down. In August of 2022, she was asked to resign from her job as a Financial Services Officer at a Credit Union, an employer she had worked with for 25 years.
Shocked with her world crumbling, Lisa soon discovered that the Credit Union had received a Suspicious Activity Report that one of the ghost merchants setup in her name was accused of money laundering.
The advertiser she was paired up with was sending the wrong products to customers and the merchant processor categorized her account as “money laundering”.
While Lisa had no direct involvement or control of the merchant accounts in her name, she was the one held responsible because she was the one that signed the bank contracts.
Victims Find Themselves Smack In The Middle Of Massive Fraud Cases
There are hundreds, perhaps thousands of victims like Lisa, each with their own devistating story. And many of those stories are tied to high profile fraud cases that have emerged in the last year.
In the US, two nationally publicized cases have resulted in dire consequences for the IBO straw owners.
The CB Surety Case – $100 Million In Alleged Deception 2023
The Department of Justice alleged that CB Surety, working with Reseller Consultants, recruited individuals to serve as straw owners of sham companies, promising them small monthly payments while using their identities to create fake businesses.
These shell companies processed nearly $100 million in transactions for high-risk merchants between 2020-2023, deceiving banks and payment processors.
The Liburdi Case – $128 Million In Straw Merchant Deceit 2024
The Grand Jury filed an indictment against Daniel Liburdi for a $128 million scheme. The scheme relied heavily on recruiting “Independent Business Owners” (IBOs) who served as straw merchants, providing their personal information in exchange for compensation.
These IBOs were used to establish merchant accounts under seemingly legitimate business names, with conspirators coaching them through bank verification calls or directly impersonating them to circumvent banking controls.
Picking Up The Pieces – It Can Take Months
For Lisa, the road back has been long. “I am having to rebuild and start my career all over again.” she tells me, “I have closed my LLC’S they have been dissolved. This has been a nightmare that haunts me.”
For other victims, it is much the same. They are left with LLC’s that need to be closed, post offices boxes crammed full of mail and sometimes collection notices. In some cases, they are shocked to find that their names are associated with merchant accounts involved in unauthorized activity.
One Reddit user complains, ” I was shocked to find out that there were many unauthorized charges /transactions made to many people’s credit/debit cards for these two businesses under my name.”
For Lisa, like so many of the other victims, she had recover alone and will never fully regain what she had before.
If you want to read an extensive list of complaints about the aftermath that impacted hundreds of resellers, check out this link – Reseller Consultant Reddit
The Ten Red Flags Of IBO Merchant Schemes
Lisa Smith and other victims came forward to me to tell their story. Trust me when I tell you they are innocent bystanders who had no idea what they were getting themselves into.
“I have always and still am a woman of integrity.”, Lisa tells me. “I lost my job because I trusted someone that promised it would be easy with no consequences.”.
So what are the red flags for people to watch out for. Here is the list of red flags.
# 1 – Promises of Easy Passive Income
Be immediately suspicious of any offer promising substantial monthly income (like $500-$1000) for minimal effort. When they claim “just 30 minutes of work monthly,” they’re masking significant risks and sometimes illegal activities.
#2 – Introduced By Youtube “Influencer”
Advertisers and merchant resellers use influencers on Youtube to recruit their members giving them a finder fee or cut for every person they recruit. The influencers usually have no idea it is a scam so they promote it as a great opportunity to make side money.
#3 – “Helping Out Merchants” or “Advertisers”
If the opportunity involves helping merchants or online advertisers that sell “subscription services”, “Keto”, or weight loss products, grow and expand, that is a red flag you should be careful of. Those merchants often have high fraud rates.
#4 – LLC Formation Requirements
When you begin the process, if the company ask you to sign lots of paperwork to form multiple LLC’s associated with your name, that is a red flag. Those LLC’s are used to establish merchant accounts in your name that will be used to process high risk credit card payments.
# 5 – Bank Account Control
Be extremely cautious of any program requiring you to open new bank accounts with specific banks. When they demand access or control over these accounts, they’re likely planning to use them for unauthorized transactions.
#6 – PO Boxes and Mailboxes Etc
Requirements to establish “virtual offices” or PO boxes at are often tactics to create fake business fronts. This creates a paper trail that distances fraudsters from their activities and you are often the front for their risky activities.
#7 – High Credit Score Requirements
These schemes often require people with credit scores over 650 the ages of 21 and 65. They are looking for people that won’t raise red flags and bypass banks credit risk controls for merchant accounts.
#8 – Pressure To Sign Multiple Documents
These schemes will send a flood of documents for you to sign. High-pressure tactics to sign multiple documents quickly should raise immediate concerns. This rush often prevents proper review of legally binding agreements that could put you at risk.
#9 – Limited Communication Channels
Participants will have no communication with the websites or insight into the daily activities. One a problem arises they will are forced to deal with “advertisers” who don’t have their best interest in mind.
#10 – Resellers, Advertisers, IBO’s
These are key words that are often associated with the scheme. If you are involved with individuals describing the scheme in these words proceed with extreme caution, you could be recruited into a straw owner scheme.
The Infographic – How To Not Be Scammed
Lets get the word out. Let’s stop innocent hardworking people from being ropped into IBO opportunities that can end up badly.
Download And Share The Red Flags With Others
You can download the infographic and share with others. Don’t fall for the IBO merchant reseller, advertiser fraud scheme!
