FTC: Court Orders Permanent Halt to Illegal Qchex Check Processing Operation
At the request of the Federal Trade Commission, a United States District Court has ordered a permanent halt to the illegal operations of an Internet-based check creation and delivery service and ordered the operators to give up all the money they made from the illegal operation.
In September 2006, the FTC charged Qchex with violating federal law by operating an online check creation and delivery service with no safeguards in place to prevent fraud. Qchex.com created and sent checks drawn on any bank account that a Qchex user identified but did not verify whether the user had authority to draw checks on that account. As a result, fraudsters worldwide used the Qchex service to draw thousands of checks on bank accounts that belonged to unwitting third parties. Defendants’ practices harmed innocent account holders whose bank accounts were debited without their knowledge or consent, as well as individuals and businesses who received fraudulent Qchex checks as payment for goods and services.
Following protracted litigation, District Court Judge Janis L. Sammartino of the Southern District of California issued a final order supporting the FTC’s charges that the defendants had created and delivered checks drawn on identified bank accounts without first verifying that a person requesting a check had authority to draw checks on that bank account.