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Federal Trade Commission Settles First Pay Case with Chi Ko

Company executive took responsibility and spent years assisting First Data and government prosecutors

NEW YORK, May 19, 2020 /PRNewswire/ -- Today, Chi "Vincent" Ko has finalized a settlement with the Federal Trade Commission regarding allegations that Mr. Ko's former company, First Pay Solutions, allowed a small number of rogue independent agents to sign up fraudster merchants for credit card processing. The rogue agents submitted falsified applications that caused First Pay and First Data (now owned by Fiserv) to accept working relationships with dishonest merchants, who then engaged in fraudulent activities that harmed consumers. 

The rogue agents allegedly created unlawful websites, registered shell companies, and generated fake invoices and shipping labels to avoid detection by First Pay and its processing company, First Data. These bad actors operated without Mr. Ko's knowledge, and many of these agents were convicted based upon the cooperation of Mr. Ko, himself described by the government as a victim in those government cases.

Jim Walden, Managing Partner of Walden Macht & Haran and lawyer for Mr. Ko, states, "Mr. Ko leveraged his background in the Asian restaurant industry to create a company that helped connect traditionally underserved business owners with payment processing solutions and access to the payment networks. As the company grew, Mr. Ko hired experienced risk and underwriting professionals to oversee an expansion into the online and related payments industry and to interface directly with First Data's internal risk and underwriting departments. First Pay's risk department ultimately failed to effectively screen out deceptive merchant applications submitted by a small set of fraudulent sales agents. That failure caused substantial financial harm to both First Pay and Mr. Ko, who agreed to turn over his entire $100 million First Pay portfolio to First Data in 2014 so that the income could be used to repay consumers harmed by the dishonest activities of these fraudulent agents and merchants. Mr. Ko unequivocally denies prior knowledge that these agents and merchants were engaged in fraud. He has spent the past several years working as a First Data executive and has continued to cooperate diligently with law enforcement to assist them in the prosecution of the fraudulent agents who engineered these pernicious schemes."

Walden continues, "Mr. Ko is confident that if the matter were to proceed to trial, the facts of the case would definitively demonstrate that First Pay exceeded its underwriting obligations and was, itself, a victim of these fraudulent agents. The arrests of these individuals were made possible by Mr. Ko's voluntary cooperation with law enforcement.  When, after these convictions, the FTC turned its sights on Mr. Ko claiming he 'should have known' about their activities, Mr. Ko decided to resolve this matter expeditiously by paying an additional monetary penalty that was far less than the legal fees he would have spent defending against the lawsuit."

Mitchell C. Shapiro of the MCShapiro Law Group, a recent addition to Mr. Ko's legal team with over 25 years experience in fintech and payment industry matters, states, "Mr. Ko is pleased that the FTC was willing to accept a settlement that permits him to rebuild his portfolio of low-risk merchant clients, primarily restaurants and others in the Asian-American business community (of which he previously had amassed 13,000), and to continue providing proprietary and other technology services and solutions to any other payments industry participants, including financial institutions, acquirers, processors, ISOs and sales agents."

Cision

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SOURCE Walden Macht & Haran