12 charged in elaborate NJ-based credit card fraud scheme

NEWARK, N.J. – A dozen conspirators were charged with first-degree money laundering and other crimes Wednesday after a joint U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations, other federal and state law enforcement effort.

The large-scale investigative effort targeted an elaborate fraud scheme in which the defendants allegedly used fictitious identities to get credit cards and open bank accounts that they used to steal about $3 million from various banks.  Eleven defendants were arrested and one remains a fugitive.

The defendants, many of whom live in Secaucus and Jersey City, allegedly created “synthetic” identities by pairing real Social Security numbers with fictitious names and birth dates, and then using them to open numerous checking and credit card accounts. 

They allegedly opened the accounts online to avoid face-to-face interaction with the financial institutions. Bad checks were deposited into bank accounts so the accounts could be used to make payments on the credit cards, which temporarily inflated the lines of credit on the cards.  In addition, funds were withdrawn from the bank accounts via ATM and U.S. Postal Money Order Purchases before the bad checks were discovered.  It is alleged that the defendants ultimately “busted out” the credit cards by running up the unpaid balances until they reached or exceeded the credit limits. 

The scheme included a group of “merchants,” who in many cases allegedly ran shell businesses set up solely for the purpose of participating in this fraud.  The merchants allegedly swiped the fraudulent credit cards using point of sale terminals and received reimbursement from credit card processing companies via wire transfer, while never actually providing any merchandise or services.  The ring members allegedly split the proceeds.  The bank accounts of the shell companies set up by the merchants also allegedly were used to launder the proceeds of the scheme with checks being written from one company to another as if they were conducting business.

The takedown of this alleged fraud ring in New Jersey is the result of an ongoing joint investigation HSI, the New Jersey Attorney General’s Office, U.S. Postal Inspection Service, New Jersey Office of Homeland Security & Preparedness, U.S. Social Security Administration Office of Inspector General and New Jersey Department of the Treasury’s Office of Criminal Investigation.  They were assisted by the Hudson County Prosecutor’s Office, Union County Sheriff’s Department, Clark Police Department, Secaucus Police Department and Jersey City Police Department.

“While the credit card holders, businesses and purchases in this scheme were fictitious, the losses suffered by the banks were very real and totaled an alarming $3 million,” said New Jersey Acting Attorney General John J. Hoffman.  “We’ll remain extremely vigilant on this front, because financial fraud on this scale hurts commerce and can bankroll other crimes.  Our investigation is ongoing, but we’re confident that with these arrests, we’ve dismantled this prolific theft ring in New Jersey.”

Hassan Shahbaz, one of the conspirators charged, is the owner of USA United Trading, a business in Jersey City that he allegedly opened for the sole purpose of defrauding financial institutions. It is alleged that USA United Trading conducted approximately $1.6 million in fraudulent credit card transactions over the past 22 months.  USA United Trading held itself out as a carpet retailer, with a store front at 150 Monticello Avenue in Jersey City that had several rolled up carpets in the window.

Investigators executed search warrants Tuesday and seized evidence at four locations where members of the ring lived or where the ring had “drop addresses” used for mailings in the scheme.  They also seized approximately $150,000 in cash and multiple bank accounts controlled by ring members containing approximately $320,000. 

Acting Attorney General Hoffman commended all of the agencies and investigators who worked on the investigation.  The investigation began when the U.S. Postal Inspection Service received a referral from Wells Fargo Bank in connection with a bad check case the bank was investigating.  The USPIS enlisted special agents of the Social Security Administration and Homeland Security Investigations in Newark, who in turn enlisted the state agencies, namely the New Jersey Attorney General’s Office, the Office of Homeland Security & Preparedness, and the Department of the Treasury’s Office of Criminal Investigation.  The New Jersey Division of Criminal Justice is prosecuting the case.

The charge of first-degree money laundering carries a sentence of 10 to 20 years in state prison, including a mandatory minimum term of parole ineligibility of one-third to one-half of the sentence imposed.  It also carries a fine of up to $500,000 and an additional anti-money laundering profiteering penalty of up to $500,000 or three times the value of any property involved.  Second-degree charges carry a sentence of five to 10 years in state prison and a fine of up to $150,000, while third-degree charges carry a sentence of three to five years in state prison and a fine of up to $15,000.

The charges are merely accusations and the defendants are presumed innocent until proven guilty.  Because they are indictable offenses, the charges will be presented to a state grand jury for potential indictment.