ISP scam targets low-income people seeking government assistance

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Man from Ohio According to the Federal Communications Commission, the US created a fake broadband provider to deceive low-income consumers who thought they were getting government-funded rebates on internet services and devices. AT Notice of Explicit Liability for Forfeiture released July 1, FCC offered a $220,210 fine against alleged fraudster Kyle Traxler.

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Traxler created an organization called Cleo Communications, which requested permission to become a supplier under the FCC Emergency Broadband Benefit (EBB) program, which provided $50 monthly discount for Internet service and other discounts for devices. “It is clear that Cleo existed for the sole purpose of obtaining financial benefit from customers under the guise of a legitimate provider of the EBB program,” the FCC notice reads. “Cleo Communications did not conduct any commercial activities outside of the EBB program and had no other business objectives.”

The FCC launched its investigation after receiving complaints from consumers in at least eight states who ordered devices and/or “hotspot services.” Some consumers have stated that Cleo threatened to sue them after they demanded a refund for goods and services they did not receive.

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Cleo’s terms of service stated that it would never refund money and that trying to get a refund through bank charges was a “breach of contract,” according to the FCC. The FCC said it received no response to the subpoena sent to Traxler and Cleo in December 2021.

The now discontinued EBB program and its replacement is $30 per month. Available Connectivity Program, provided money to directly participating broadband providers who offer monthly discounts. Some forms of telecommunications fraud include the use of fictitiousunacceptable or duplicate clients to receive payments from FCC programs, but the FCC said that Traxler was instead directly defrauding consumers:

Although Cleo never applied for or received payments from EBB, Cleo promised consumers that they would receive EBB discounted broadband services and devices in exchange for Cleo’s online electronic payments, but the company never provided broadband. services or devices. Cleo’s schemes to deceive consumers under the guise of participating in the EBB program have caused serious damage not only in monetary terms to the low-income consumers it preyed on, but also to the trust and goodwill that this or any other program needs to effectively achieve its goals.

FCC Claims “Multiple Wire Fraud Violations”

The FCC said it does not know the full extent of the damage because “many consumers may have been scammed and have not filed complaints” and others may have chosen not to apply for discounts from other suppliers “because of their experience.” with Cleo or from hearing about other consumers’ experiences with Cleo.”

The FCC Liability Notice is the first important step towards imposing a fine. The Federal Communications Commission has bad track record to collect fines due to its limited enforcement powers, but the Department of Justice has the power to collect unpaid fines when the FCC refers a case to that agency.

This is where criminal liability is possible. The FCC said that applicants for the EBB program were warned that filing a false statement could result in “criminal prosecution and/or liability under the False Claims Act.” Electronic fraud can also result in imprisonment for up to 30 yearsand the FCC stated that Cleo “apparently committed several electronic violations” by accepting payments through interstate transactions and never delivering ordered services or devices.

Traxler’s fraud lasted from May to August 2021, during which he “repeatedly engaged in acts that violate federal wire fraud law and Commission rules,” the FCC said in a statement. According to the commission, the proposed $220,210 fine is “the maximum law we can impose and reflects the scale, duration, severity and egregious violations on Cleo’s part.”

When Cleo applied for the EBB program, the FCC initially told the organization that her application would be “rejected because it did not contain enough information to approve.” But Cleo subsequently received FCC approval by offering documents, including copies of two invoices, “with customer-identifying information removed, which Cleo claimed was related to CPNI and privacy.” wireless Internet” for up to 500 clients.

Dozens of almost identical complaints

The FCC said it has reviewed 41 complaints against Cleo, all of which “focus on the same types of allegations. According to complaints, consumers searched for a list of providers participating in the EBB program on the Universal Service or individual state EBB websites, on the FCC website. or USAC [Universal Service Administrative Company] website and followed links to Cleo’s website. The complaints alleged that Cleo accepted payment for discounted broadband services or connected devices under the EBB program from these consumers electronically, did not ship the ordered product or provide the services requested, and then did not return the money.”

The FCC interviewed eight complaining consumers in Alabama, Arizona, Colorado, Illinois, Massachusetts, New York, Washington, and Wisconsin.

An Illinois woman ordered a $50 laptop from Cleo using Venmo. The woman did not receive a response when she contacted Cleo to say she never received the laptop, according to the FCC. She then “tried to contact Cleo via social media (Facebook) and by phone, but Cleo didn’t answer and blocked her both on Facebook and on the phone,” the FCC said in a statement.

NYC woman “Ordered an EBB discounted tablet, laptop, Wi-Fi box and hotspot on Cleo’s website on July 13, 2021 and arranged for a $108.94 payment on the website via PayPal” , the FCC said in a statement. This consumer “told the Bureau staff that she emailed Cleo when she didn’t receive the devices she ordered and that Cleo’s staff were “rude to her and said they didn’t need to service her.” She said that someone at Cleo told her to “read the fine print.” She exchanged several emails with Cleo until she eventually stopped responding.”

Other complainants also stated that Cleo stopped responding to device search messages that they never received. Some consumers have been able to cancel payments made with a credit card or PayPal.

“Eight consumers interviewed by the Bureau and other consumers who filed complaints with the FCC Consumer Complaints Center stated that Cleo did not provide the EBB supported services or devices they ordered and the company refused to issue a refund. Some consumers have stated in their complaints that Cleo has said it will sue them when they seek a refund,” the FCC said.

Questionable terms of service prohibit refunds

The terms of service that Cleo cited when denying a refund stated that the company “DOES NOT and will never mean or agree to refunds, credits or any other refunds for services and money to be returned to you.”

“Cleo Communications provides PREPAID services. All services are sold as [sic] and without warranty. Under no circumstances does Cleo Communications make any warranties or provide any kind of refund of any kind for the services offered,” the terms and conditions, according to the FCC, state. Cleo’s terms and conditions also state that “a refund through any client bank is a breach of contract at any time and is subject to further legal action, including but not limited to small claims lawsuits for breach of contract to the extent of what is disputed, any and all legal costs , attorney fees, filing fees, 9.9% interest and a $300 breach of contract fine.”

Rude answers: “You will be sued”

The FCC document details incidents in which Cleo responded to clients seeking refunds by threatening to sue or file harassment charges:

For example, on August 2, 2021, when a client sent an email asking for a refund, Cleo replied: “[y]our desire to hide behind PayPal instead of contacting us. We will not refund your money. We will not allow you to use your benefits as we requested them. And you will be sued. Cleo Leaving.

On August 10, 2021, when another customer requested a refund, Cleo responded, “Refund denied. Please read the terms of service, which set out your rights, as well as our obligations and rights that will be imposed. Also your EBB has been requested. use our credit elsewhere and you will be billed. Cleo Collections.” Cleo continued in a later email with this client, saying, “[n]ext time to read before ordering. How can we no longer communicate. Any further emails will result in a harassment charge in Ohio. Cleo Legal”.

On August 12, 2021, Cleo stated to another customer: “[w]We do not ignore you or charge you. You have requested a refund and no refund is given and you have been informed of this and someone will decide [sic] one will be released or not. See This is what was sent to the FCC. With papers that you and weren’t ignored, what your claims claim [sic]. CLEO Legal issues.

This story originally appeared on Ars Technique.

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