A payment processor that fronted more than 1,000 sham merchants is paying $12 million

Humboldt Merchant Services will pay $12 million and accept a permanent ban from processing payments for high-risk merchant categories to settle Federal Trade Commission allegations that it knowingly kept fraudulent businesses running. The FTC’s complaint says the Tempe, Arizona-based processor opened and processed payments for more than 1,000 merchants that were shell entities — fronts and pass-throughs for companies engaged in unauthorized billing scams, including Legion Media, which the FTC separately shut down in 2024. The Commission voted 2-0 to approve the proposed order, filed September 8, 2026 in the U.S. District Court for the Eastern District of Michigan.

Humboldt is the business name of 5967 Ventures, with an affiliated office in Troy, Michigan. Payment processors sit at a chokepoint in the consumer-fraud economy: without one willing to route transactions through the card networks, a scam operation cannot collect money from victims at scale, no matter how convincing its pitch is. The FTC’s complaint argues Humboldt was that chokepoint for more than a thousand fraudulent operations at once, and knew it.

Chargebacks Nearly Ten Times the Industry Warning Line

The FTC’s complaint does not allege Humboldt was fooled by sophisticated fraud. It alleges the company opened sham accounts despite red flags that a competent processor would have caught, chief among them chargeback rates the FTC says ran almost 10 times higher than what credit card brands treat as excessive. A chargeback rate that high is not a rounding error in a risk model; card networks use excessive-chargeback thresholds specifically to flag merchants whose own customers are disputing charges at a rate that signals fraud, not friction.

Beyond tolerating those numbers, the FTC alleges Humboldt worked to keep the volume flowing. The company is accused of routing higher-risk transactions through a lower-risk bank identification number — the code that tells a cardholder’s bank which merchant category it is approving a charge for — licensed to an affiliated entity, specifically to improve the odds that flagged transactions would clear. That tactic, sometimes called load balancing or BIN masking in payments-industry terms, is one of the specific practices the proposed order now bars Humboldt from engaging in or assisting others in doing.

Katherine White Says the Case Is About Accountability, Not Ignorance

“Humboldt was processing payments for companies despite red flags indicating they were scamming consumers,” said Katherine White, Deputy Director of the FTC’s Bureau of Consumer Protection, in the agency’s announcement. White added that the case reflects the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses. Her language tracks the complaint’s core theory: the FTC is not arguing Humboldt failed to notice the fraud, but that it noticed and processed the payments anyway.

That distinction shapes the remedy as much as the monetary judgment. Rather than a fine alone, the proposed order carries forward-looking conduct restrictions built to close off the specific choices the FTC says Humboldt made.

The case also illustrates why payment processors, rather than only the scam operators themselves, have become a recurring FTC enforcement target. A single fraudulent operation can be shut down and reopen under a new name within weeks, but a processor willing to open new merchant accounts for it provides the one piece of infrastructure a scam cannot easily replace: a working channel to charge cards. Targeting that channel, rather than chasing each shell company individually, is the theory behind treating Humboldt’s own conduct as the violation.

What the Company Is Banned From Doing Next

Under the proposed order, Humboldt is barred from processing payments for four categories of merchants going forward: straw companies, merchants listed on Mastercard’s Alert to Control High-Risk (MATCH) database for chargebacks, laundering or fraud, merchants that have already faced law enforcement action, and e-commerce entities that use a third-party mailbox — a UPS Store address, for instance — as their only business location while running negative-option billing or lacking any processing history. Those four categories map closely to the profile of the shell merchants named in the complaint, turning the case’s specific findings into a standing rulebook for how Humboldt can operate.

The order also prohibits Humboldt from making or assisting others in submitting false or misleading information to obtain payment processing, and from engaging in — or helping others engage in — tactics designed to dodge fraud and risk monitoring, including the load-balancing practice the complaint describes. The $12 million judgment itself is earmarked for consumer redress; under the settlement terms, Humboldt’s counsel holds the funds in escrow and must remit them within seven days of the order’s entry.

Consumer redress in a case like this typically flows back to people who disputed charges from the shell merchants and either lost the dispute or never filed one, rather than to every cardholder who transacted with Humboldt-processed accounts broadly. The FTC has not yet published a claims process or timeline for how the $12 million will be distributed, since that step generally follows final court approval of the order rather than the announcement of the settlement itself.

A Second Case Built on the Same Underlying Fraud

The Legion Media reference in Humboldt’s complaint is not incidental. The FTC shut Legion Media down in 2024 over unauthorized billing and credit-card-laundering allegations of its own, and Humboldt’s role, as described in the new complaint, was to keep that operation and others like it able to charge cards even after the underlying fraud pattern was visible in the chargeback data. The order carries the force of law once a district court judge signs it, which the FTC notes is still pending at the time of the announcement — leaving the final step in Humboldt’s case, formally, in a Michigan courtroom rather than at the agency itself.

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This article was produced with the assistance of AI and reviewed by Morning Overview editors prior to publication.