Federal Court Holds Payment Processor Cliq in Contempt Over FTC Order Violations

Key Takeaways

• Federal Court Finds Contempt: A federal judge in Nevada found Cliq Inc. and executives Andrew Phillips and John Blaugrund in civil contempt for violating a 2015 FTC order tied to payment processing and fraud prevention obligations.
• $6.5 Million Sanction Imposed: The court ordered the defendants to pay $6.5 million in sanctions for conduct the FTC said facilitated fraud and bypassed required compliance controls.
• MATCH List Processing Highlighted: The court found Cliq processed hundreds of millions of dollars in transactions for merchants listed on Mastercard’s MATCH database for high-risk merchants.
• Underwriting Failures Detailed: According to the FTC, the company failed to conduct required underwriting reviews, ignored evidence of shell companies, and accepted “obviously false” websites submitted on merchant applications.
• Fraud Monitoring Controls Circumvented: The court concluded the defendants helped certain merchants avoid fraud and risk monitoring programs by masking chargeback rates and shifting transactions between accounts.

Deep Dive

A federal judge in Nevada has ordered payment processor Cliq and two of its executives to pay $6.5 million in sanctions after finding they violated a 2015 court order intended to prevent the company from facilitating consumer fraud.

The order found Cliq, along with executives Andrew Phillips and John Blaugrund, in civil contempt for multiple violations tied to payment processing practices the court concluded breached core provisions of the earlier FTC order.

According to the Federal Trade Commission, the court found the defendants processed hundreds of millions of dollars in transactions for merchants listed on Mastercard’s Member Alert To Control High-risk merchants database, commonly known as MATCH, which is used to identify high-risk merchants.

The court also concluded the defendants helped certain merchants avoid fraud and risk monitoring programs. According to the FTC, that conduct included processing so-called “friendly” transactions designed to mask actual chargeback rates, helping merchants process payments under different names, and shifting transactions from closed accounts into active accounts.

The ruling further found the company failed to conduct required underwriting reviews mandated under the 2015 order. The FTC said the court determined the defendants neglected to collect or verify required business information, ignored evidence of shell companies, and waived documentation requirements during onboarding and monitoring processes.

In one portion of the ruling highlighted by the FTC, the court found the company accepted “obviously false” websites listed on payment processing applications without conducting further investigation.

The court also found the defendants continued processing payments for merchants that repeatedly exceeded chargeback thresholds established under the earlier order without conducting required investigations or producing written reports to justify continued processing activity.

According to the FTC, the court concluded the defendants had “systematically failed to complete [their] reporting obligations” under that portion of the order.

“It is a Commission priority to root out fraud in the payments system,” said Christopher Mufarrige in a statement announcing the ruling. “I am pleased the court held Cliq, Andrew Phillips and John Blaugrund accountable for violating the requirements of the order they agreed to in 2015.”

Mufarrige added that the ruling should send “a strong signal” that the FTC intends to continue enforcing its orders and targeting fraud within the U.S. payments ecosystem.

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