An Indian-origin man in the US has been indicted for committing wire fraud worth $98 million, the Department of Justice said on Friday.
The 34-count indictment charges Gopalkrishna Pai from Texas, previously residing in Puerto Rico, of being engaged in a scheme to defraud merchant processors and others by submitting false information and falsified documentation to create merchant accounts in the name of straw companies to process credit card and electronic payments and to receive a substantial financial benefit.
The fraudulent scheme employed by Gopalkrishna Pai disguised his involvement and use of over 100 companies formed to facilitate the processing of approximately $98 million in gross revenue in online retail sales, the Department of Justice alleged.
As a part of the conspiracy, he owned and operated F9 Advertising LLC (F9), a for profit limited liability company organised in Puerto Rico in May 2014 and registered under the Export Services Act, Puerto Rico Act 20 of 2012.
F9 engaged in the sale of personal care products, including skin creams, through the internet utilising a negative option marketing model.
Negative option marketing is a category of commercial transactions in which sellers interpret a customer's failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.
The man allegedly created over 100 liability companies (Straw Companies), obtained individual Employer ID Numbers (EINs) from the Internal Revenue Service (IRS) for each Straw Company and opened individual commercial bank accounts under his control for each straw company.
False documents were then created and submitted to merchant processers to create merchant accounts to process online sales, and to disguise Gopalkrishna Pai''s involvement.
Federal prosecutors alleged that the true owner and operator of the Straw Companies was disguised through the falsification of bank records and EIN tax documents and other information in order to prevent merchant processors and their related financial institutions from having knowledge of the true owner and operator, which was the defendant.