CB Surety Executive Pleads Guilty in $111 Million Merchant-Fraud Scheme

California-based CB Surety helped high-risk merchants obtain and retain access to banks and card-payment networks. Prosecutors said the processor concealed clients’ identities and business activities through sham merchant accounts, allowing fraudulent operators to evade transaction, chargeback and refund monitoring. The case underscores weaknesses in the continuing due diligence performed by acquiring banks and payment processors after merchants are approved.

The head of CB Surety pleaded guilty to conspiring to commit bank fraud, according to the U.S. Department of Justice. The company created fraudulent merchant accounts that kept suspect clients connected to payment services and processed more than $111 million in transactions through the scheme. The plea was announced recently; a sentencing date was not specified in the supplied report, and the court will determine the penalty.