FTC Targets Payment Processor in Proposed $12 Million Sham-Merchant Settlement

Background

On Sept. 8, 2026, the FTC filed a complaint and proposed stipulated order in the U.S. District Court for the Eastern District of Michigan against 5967 Ventures, LLC, doing business as Humboldt Merchant Services (Humboldt), a payment processor.[1] The complaint alleges that Humboldt violated Section 5 of the FTC Act by opening, maintaining, and processing transactions through merchant accounts it knew or should have known were shell companies or engaged in fraud.[2] 

The FTC seeks permanent injunctive and other relief under Section 13(b) of the FTC Act.[3] Under the proposed order, Humboldt would pay $12 million in monetary relief and be subject to permanent conduct restrictions and detailed merchant-screening, monitoring, and sales-agent oversight requirements.[4] Humboldt neither admits nor denies the allegations, except as necessary to establish jurisdiction, and the proposed order would take effect only if entered by the court.[5]

The proposed resolution also reflects the Commission’s post-AMG pathway for monetary relief. Although Section 13(b) does not authorize equitable monetary relief, the stipulation also would resolve a potential administrative proceeding under 16 C.F.R. pt. 3 and a potential follow-on action under Section 19(a)(2) of the FTC Act.[6] 

The FTC’s Allegations

The complaint alleges that Humboldt processed payments for more than 1,000 merchants it knew, or consciously avoided knowing, were shell entities serving as fronts or pass-throughs for third parties engaged in unauthorized-billing schemes, and that Humboldt processed more than $100 million through those sham accounts from 2021 through 2023.[7] The FTC further alleges that Humboldt opened more than 1,000 accounts connected to a transaction-laundering network and processed at least $139 million through the identified shell accounts from January 2021 through January 2024.[8] 

The factual narrative relies heavily on Humboldt’s internal records and alleges that:

1. Card-network and internal warnings identified systemic risk. Mastercard reviews between 2017 and 2019 allegedly identified widespread load balancing and card sharing across thousands of Humboldt accounts. In April 2019, a senior underwriter allegedly told management that underwriting personnel had identified straw applications, unauthorized websites, and “obvious load balancing” for years but had been instructed to ignore those patterns, particularly for favored sales agents.[9]
2. Merchant applications allegedly obscured negative-option activity. After Mastercard’s rules for negative-option trial merchants took effect, Humboldt allegedly accepted “travel pack” applications that masked trial billing by presenting small travel-size products as one-time sales, assigned lower-risk merchant category codes, and did not register those accounts under Mastercard’s negative-option program.[10]
3. High-risk accounts allegedly migrated to the lower-risk BIN of an affiliate, NorthAB, LLC (NAB). Starting in October 2020, Humboldt allegedly placed Performance Marketing accounts on NAB’s BIN, where an internal analysis reported an 82% approval ratio compared with 47% on Humboldt’s BIN. By mid-2021, those accounts allegedly had a chargeback rate exceeding 7%, compared with 0.08% for NAB’s BIN overall.[11]
4. Sales-agent concentration and incentives allegedly amplified the risk. Most relevant referrals came from two sales agents, and the complaint alleges that Humboldt’s president secretly shared residuals with one agent’s owner.[12]

Count I alleges that Humboldt opened or maintained accounts for merchants it knew or should have known were shell companies or engaged in fraud, processed transactions for those merchants, failed to terminate them timely, and ignored evidence of fraudulent activity.[13] The operative standard pleaded is constructive knowledge, not proven intent. The complaint does not plead a separate deception count or charge credit card laundering as an independent statutory violation; instead, the alleged laundering and monitoring-evasion practices support the Section 5 unfairness theory and the proposed injunctive relief.

The alleged warning signs were not limited to high chargeback rates. The complaint points to card-network reviews, repeated account patterns, recently formed entities, mailbox addresses, third-party control of core operations, short account life cycles, recurring closure reasons, unusual entity and URL naming conventions, and direct internal warnings from underwriting personnel.[14] Taken together, those allegations illustrate the types of information the FTC relied on to plead that Humboldt knew or should have known of merchant fraud, even though the complaint does not allege actual knowledge as to every merchant at onboarding.

Terms of the Proposed Order

The proposed order would enter a $12 million monetary judgment, which Humboldt stipulates its counsel holds in escrow and must remit within seven days after entry.[15] The Commission may use the funds for consumer redress or, if direct redress is impracticable, related relief, with any remainder deposited in the U.S. Treasury.[16] 

Additional terms include:

• Conduct prohibitions. The proposed order would permanently enjoin Humboldt from credit card laundering, making false or misleading statements to obtain payment-processing services, using tactics to evade fraud or risk monitoring, and processing for straw companies, certain MATCH-listed merchants, merchants previously named in specified public consumer-protection actions, and certain e-commerce merchants whose only address is a mailbox, registered-agent office, or virtual office.[17]
• Enhanced screening. For defined “covered clients,” Humboldt must collect and verify information concerning the merchant’s business, ownership, addresses, prior processors, processing statements, chargeback history, marketing materials, websites used throughout the purchase flow, and prior enforcement or monitoring history. For newly formed applicants or applicants without processing history, Humboldt must conduct and document a principal-verification call.[18]
• Ongoing monitoring. Humboldt must regularly review covered clients’ websites from an IP address not associated with Humboldt, chargeback data and reason codes, complaints, search results, and indicators of laundering or monitoring evasion.[19]
• Numeric escalation triggers. A covered client that, in two of the preceding six months, has a monthly chargeback rate exceeding 1.0% and more than 50 chargebacks in a month triggers an immediate investigation. Unless a written report establishes that the client’s practices are not deceptive or unfair, Humboldt must stop processing and close the client’s accounts within 60 days. Humboldt must close the accounts of a covered client it knows or should know is evading monitoring programs as soon as practicable and no later than five business days.[20]
• Sales-agent oversight. Humboldt must screen sales agents and their controlling or 25% owners against the MATCH list, specified criminal-history criteria, and the Office of Foreign Assets Control’s Specially Designated Nationals and Blocked Persons List. Humboldt also must review agent-level risk metrics monthly, investigate elevated chargeback or risk-closure rates, document remediation, and report quarterly to its chief officers.[21]

These proposed conduct restrictions extend beyond prohibiting specified merchant relationships and address conduct alleged in the complaint, including inaccurate merchant classification, use of multiple accounts or billing descriptors, misrepresentation of negative-option features, and tactics that allegedly placed higher-risk activity on an affiliate BIN to increase approval ratios.[22] The proposed order pairs those prohibitions with controls designed to verify merchant identity, business model, marketing practices, transaction activity, and referral sources before and after onboarding.[23] 

Key Takeaways

This enforcement action reflects the FTC’s sustained focus on holding payment processors and financial intermediaries accountable for the merchants they serve. The agency’s position, as reflected in the complaint, is that a processor may face liability where it knew or should have known of merchant fraud and ignored available warning signs. Although the proposed order would bind only Humboldt and is not a rule of general application, its detailed controls may provide useful comparison points for payment-industry risk-management programs.

Companies operating in the payments ecosystem, including payment processors, independent sales organizations, acquiring banks, payment facilitators, and technology platforms, should consider whether their onboarding and monitoring programs connect merchant identity, business model, websites and purchase flows, chargeback and complaint data, referral-source performance, and internal risk escalations. The proposed order also highlights the importance of documenting investigation and closure triggers, merchant-classification and BIN-placement decisions, and sales-agent oversight.

[1] Complaint for Permanent Injunction and Other Relief ¶¶ 12, 17–19, FTC v. 5967 Ventures, LLC, No. 2:26-cv-13303 (E.D. Mich. filed Sept. 8, 2026), ECF No. 1 [hereinafter Complaint].

[2] Id. ¶¶ 121–24.

[3]See 15 U.S.C. § 53(b); Complaint ¶ 1

[4] Stipulated Order for Permanent Injunction and Other Relief §§ I–VII, FTC v. 5967 Ventures, LLC, No. 2:26-cv-13303 (E.D. Mich. filed Sept. 8, 2026), ECF No. 2-1 [hereinafter Proposed Order].

[5] Id. ¶¶ 3–5.

[6]See AMG Cap. Mgmt., LLC v. FTC, 593 U.S. 67, 70, 75–81 (2021); Proposed Order at 1.

[7] Complaint ¶ 2.

[8] Id. ¶¶ 108, 117.

[9] Complaint ¶¶ 51–58.

[10] Id. ¶¶ 71–85.

[11] Id. ¶¶ 88, 92, 96.

[12] Id. ¶¶ 5, 91, 97–99.

[13] Id. ¶¶ 122–24.

[14] Complaint ¶¶ 51–59, 97–107.

[15] Proposed Order §§ VII.A–B.

[16] Id. § VII.G.

[17] Proposed Order §§ I–II.

[18] Id. Definitions F, U; § III.

[19] Id. § IV.B–D.

[20] Id. § IV.E–G.

[21] Id. §§ V–VI.

[22] Complaint ¶¶ 61, 71–96; Proposed Order §§ I–IV.

[23] Proposed Order §§ III–VI.