A federal judge in Nevada has ordered payment processor Cliq Inc., formerly Cardflex Inc., and its executives Andrew Phillips and John Blaugrund to pay $6.5 million in sanctions for violating a 2015 court order issued by the Federal Trade Commission (FTC) aimed at preventing consumer fraud.
On May 13, 2026, the U.S. District Court found that Cliq and its operators were in civil contempt for repeatedly breaching core provisions of the FTC’s previous order. The violations included facilitating fraudulent transactions and failing to conduct necessary risk monitoring and underwriting required to prevent fraud.
Violations of the 2015 FTC Order
The court ruled that Cliq processed hundreds of millions of dollars in transactions for merchants listed on Mastercard’s Member Alert To Control High-risk merchants (MATCH) list, which signals potential fraud risks. The company and its operators also helped merchants circumvent fraud detection by processing “friendly” transactions to disguise actual chargeback rates. Additionally, they processed payments for merchants under various names to avoid scrutiny and shifted transactions from closed accounts to active accounts.
Unchecked lapses in underwriting were a significant violation. Cliq neglected to verify mandatory business information, accepted false website details without investigation, and overlooked evidence suggesting the involvement of shell companies. Merchants repeatedly exceeding chargeback limits were allowed to continue processing without proper investigation or reporting. The court found Cliq systematically failed to meet its reporting obligations as mandated by the 2015 order.
FTC Response and Enforcement
Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, emphasized the agency’s commitment to eliminating fraud in the payments ecosystem. “Cliq and its executives assisted and facilitated scammers in avoiding fraud and risk monitoring programs and failed to conduct the 2015 order’s required underwriting,” he said, highlighting the court’s decision as a strong message that the FTC will enforce its orders vigorously.
The $6.5 million sanction represents a civil contempt penalty to address the harm caused by the defendants’ violations. The case was led by FTC staffers Benjamin Theisman, Benjamin Davidson, Iris Micklavzina, and Lashanda Freeman.
Why it matters
This ruling underlines the FTC’s ongoing efforts to protect consumers and preserve the integrity of the payment processing system by ensuring companies comply with legal safeguards against fraud. It demonstrates that payment processors and their executives can face significant penalties for facilitating scams and ignoring regulatory obligations designed to protect consumers and financial networks.
Background
The original 2015 federal court order required Cliq to implement strict underwriting standards, conduct due diligence on merchants, monitor for fraudulent activity, and submit detailed reports to the FTC. Payment processors like Cliq are critical gatekeepers in the financial system and must prevent high-risk and fraudulent transactions to avoid enabling scams. The FTC’s enforcement of such orders is part of its broader mandate to thwart deceptive and unfair business practices.
Sources
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