Wednesday March 28, 2012
Defendants Allegedly Used Stolen Credit Card Information to Purchase EZ Pass Tags Totaling
More Than $100,000
The Fraudulent Merchant Accounts
In order to process credit and debit card transactions, a business must establish an
account with a credit and debit card processor, known as a “merchant account.” Each merchant account is linked to a bank account associated with the business.
As part of their scheme, KHANDAKAR and SAELIM established fraudulent online
merchant accounts linked to phony businesses, which they used to process bogus credit and debit card charges. Some of the charges were unauthorized, and others were authorized, but goods or services were almost never provided to customers in return. For example, they founded a site that purported to sell childcare-related products. However, instead of fulfilling orders that customers placed through the website, KHANDAKAR and SAELIM generally pocketed the customer payments. They also used phony merchant accounts, linked to businesses called “Tips,” “La Pala Pa,” and “Café 007,” to make unauthorized charges on stolen credit and debit
cards.
Through these fraudulent merchant accounts, KHANDAKAR and SAELIM attempted to make more than $3 million worth of charges on at least 385 stolen American Express credit card accounts, and attempted more than $2 million worth of additional unauthorized charges on more than 1,000 credit or debit card accounts at Citibank, JP Morgan Chase, Bank of America, and Discover, among others. In some cases, the same credit cards that incurred charges in connection with the fraudulent EZ pass purchases were also charged in connection with the
fraudulent merchant accounts.
Preet Bharara, the United States Attorney for the Southern District of New York, Brian
G. Parr, the Special Agent-In-Charge of the United States Secret Service, Barry L. Kluger, the Inspector General of the New York State Metropolitan Transportation Authority, Office of the Inspector General (“MTA-OIG”), and Robert E. Van Etten, the Inspector General for the Port Authority of New York and New Jersey, announced charges today against RANAKHANDAKAR and USAWAN SAELIM for engaging in a $6 million Internet-based credit card fraud scheme. As part of their scheme, the defendants used stolen credit cards to purchase $100,000 worth of EZ pass tags and credits, which they then re-sold. They also caused fraudulent charges to be made on stolen credit and debit cards and created a bogus website that lured customers into purchasing products that they never received. In total, KHANDAKAR and SAELIM compromised more than 1,400 credit and debit cards, attempting to charge more than
$6 million to these accounts. KHANDAKAR and SAELIM were arrested this morning at their home in Brooklyn, New York and are expected to be presented later today in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants essentially
operated a high-tech skimming operation, cleverly updated for the Internet era. They allegedly used stolen credit card accounts, phony websites with catchy names like Dr. EZ Pass, and bogus online merchant accounts to trap victims in an elaborate web of cyber fraud. As alleged in the complaint, these two cyber criminals attempted a $6 million credit and debit card fraud scheme, netting themselves $4 million in luxury goods, services, and cash.
As part of the scheme, they allegedly lured customers into buying discount EZ pass tags from a website that was nothing more than a high-tech ‘fence’ for EZ pass tags they purchased using stolen credit card information. As fraudsters increasingly turn to the Internet to carry out their schemes, we will follow them there.”
Special Agent-In-Charge Brian G. Parr said: “This investigation is a testament to the
hard work and collaboration between the Secret Service New York Field Office, local law enforcement and private sector partners. The Secret Service constantly adapts its investigative strategies to guard against emerging cyber criminal activity, in order to hinder these types of schemes and bring these perpetrators to justice.”
MTA Inspector General Barry L. Kluger said: “Combating fraud against the MTA and its
customers is a top priority for our office, and we have worked closely with the MTA agencies to be alert to the red flags of criminal activity. Indeed, we congratulate the attentive and diligent employees of MTA Bridges and Tunnels and the EZPass call center who discovered this fraudulent scheme, identified the perpetrators, as alleged in the complaint, and promptly referred the matter to our office and the Secret Service. We thank the Office of the United States Attorney for the Southern District of New York and all the members of the investigative team for their collaborative support culminating in today’s charges. We remind the public to be alert to similar scams or schemes, and encourage them to use our Hotline to report suspicious activity.”
Port Authority Inspector General Robert E. Van Etten said: “This scheme preyed on the
public making them believe they were dealing with a legitimate website from which to acquire an EZPass tag. Dr. EZPass made a bad house call and now will have to pay the price for it. The public needs to be aware that they utilize only official government websites from which to obtain a tag. The Port Authority is serious about preventing fraud and identifying violators and those taking advantage of the EZPass system. Working with our law enforcement and agency partners, my office will continue to aggressively pursue those defrauding the EZPass system.”
The following allegations are based on the Complaint unsealed earlier today in
Manhattan federal court:
From November 2008 to the present, KHANDAKAR and SAELIM engaged in a largescale and sophisticated cyber fraud, involving over $6 million in attempted fraudulent charges on 1,400 credit cards and debit cards, many of which were stolen. The defendants’ fraud consisted principally of two schemes from which they netted approximately $4 million worth of goods, services, and cash.
The Fraudulent EZ Pass Purchases
KHANDAKAR and SAELIM used at least 50 stolen American Express credit cards to
purchase EZ Pass tags and credits. They then resold the tags and credits through two websites they founded – www.drezpass.com and www.ezpasstag.com. Neither of these websites was anauthorized EZ Pass retailer. Because they had obtained the EZ Pass tags and credits for free using stolen credit cards, their profit margin from purchases made through their websites was 100%. To date, the investigation, which began in December 2011, has identified at least 900 EZPass accounts involved in the fraud. These accounts have incurred more than $100,000 worth of charges since July 2011.
The Fraudulent Merchant Accounts
In order to process credit and debit card transactions, a business must establish an
account with a credit and debit card processor, known as a “merchant account.” Each merchant account is linked to a bank account associated with the business.
As part of their scheme, KHANDAKAR and SAELIM established fraudulent online
merchant accounts linked to phony businesses, which they used to process bogus credit and debit card charges. Some of the charges were unauthorized, and others were authorized, but goods or services were almost never provided to customers in return. For example, they founded a site that purported to sell childcare-related products. However, instead of fulfilling orders that customers placed through the website, KHANDAKAR and SAELIM generally pocketed the customer payments. They also used phony merchant accounts, linked to businesses called “Tips,” “La Pala Pa,” and “Café 007,” to make unauthorized charges on stolen credit and debit
cards.
Through these fraudulent merchant accounts, KHANDAKAR and SAELIM attempted to make more than $3 million worth of charges on at least 385 stolen American Express credit card accounts, and attempted more than $2 million worth of additional unauthorized charges on more than 1,000 credit or debit card accounts at Citibank, JP Morgan Chase, Bank of America, and Discover, among others. In some cases, the same credit cards that incurred charges in connection with the fraudulent EZ pass purchases were also charged in connection with the
fraudulent merchant accounts.
Through their scheme, KHANDAKAR and SAELIM attempted to charge more than $6
million to the compromised accounts, and in total, they obtained at least $4 million worth of goods, services, and cash. Their purchases ranged from luxury goods such as a Mercedes-Benz to personal items such as pet insurance. They also used the proceeds for mundane daily expenses, often using other individuals’ credit and debit card accounts to order takeout food three times a day.
* * *
KHANDAKAR, 27, and SAELIM, 27, both of Brooklyn, New York, are each charged
with one count of conspiracy to commit access device fraud and one count of aggravated identity theft. They each face a maximum of nine-and-a-half years in prison.
Mr. Bharara praised the Secret Service, the MTA-OIG, and the Port Authority OIG for
their excellent and swift work in this investigation. He also thanked the New York State Police, the New York State Department of Vehicles Field Investigative Unit, and the Social Security Administration for their assistance in the investigation.
The charges and allegations contained in the Complaint are merely accusations, and the
defendants are presumed innocent unless and until proven guilty.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S.
Attorneys James J. Pastore and Christine I. Magdo are in charge of the prosecution.
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