The U.S. Federal Trade Commission has charged a Florida-based data broker operation with illegally selling consumers’ financial information to scammers who allegedly used it to steal millions of dollars, the agency announced on Wednesday.
The case shows how customer information collected and aggregated by data brokers can end up in the wrong hands, said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.
“There’s a lot of debate going on about what’s the harm when you sell consumers’ data?” Rich said in an interview. “Well, one of the harms is that data brokers that aren’t legitimate can sell data to scam artists.”
$7.1 million allegedly stolen from consumers’ bank accounts and credit cards
Data brokers are companies that compile information about consumers from their online activities, purchase histories, public records and other sources to build detailed profiles they sell to third parties for marketing, fraud prevention and other purposes.
In court documents, the FTC accuses Sequoia One, LLC, headquartered in Tampa, Fla., and Gen X Marketing Group LLC, based in Clearwater, Fla., of selling payday loan applications that contained consumers’ Social Security numbers, account numbers, phone numbers, dates of birth and other personal information to third party companies that used the data to commit fraud.
Both Sequoia and Gen X Marketing share owners, offices, employees and funds, according to the documents.
One of the third parties that purchased loan applications from Sequoia and Gen X was a fake Internet merchant, Ideal Financial Solutions Inc., FTC attorneys said in a complaint filed on Aug. 7.
Ideal Financial bought the applications for 50 cents each between 2009 and 2013 and then used the data to steal $7.1 million from the bank accounts and credit cards of more than half a million consumers, according to the FTC.
A federal court halted Ideal Financial’s operations at the FTC’s request in February 2013.
The FTC accuses managers at Sequoia and Gen X of working with Ideal Financial to cover up the unauthorized charges by burying language in fine print that ostensibly gave Ideal Financial advance authorization to debit consumers’ accounts.
The FTC’s complaint identifies Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew Jr., and Paul T. McDonnell as managers of Sequoia and Gen X who were aware of the high probability for fraud, but either were “recklessly indifferent” or “intentionally avoided the truth.”
McDonnell and the Bartholomews have agreed to settle the FTC’s charges, the agency said.