Sophisticated Ghost Merchant Scheme Hits Chicago Business

Instances of fraud are on the rise, with U.S. businesses losing about 5 percent of their gross revenues to fraud. These schemes can be especially harmful to small businesses, and they’re getting increasingly sophisticated.

For example, a small Chicago housing development business was recently charged more than $40,000 in fraudulent expenses. And it took months of discussions with the company’s bank to finally convince them that fraud occurred, thanks to the great lengths that fraudsters went through to convince the bank of their legitimacy.

Jeff Benach is the owner of Lexington Homes, based in Chicago’s Lincoln Park neighborhood. The company recently ordered renderings from a company based in Canada. But they ultimately canceled this service when the initial mockups didn’t meet expectations. Shortly after, Benach started noticing large charges on his credit card, all going to a different company based in the same Canadian city as the original merchant.

When he disputed the charges with his credit card company, he learned that the ghost merchant that was submitting these charges had provided plenty of proof of a legitimate business relationship, including invoices, renderings, and even emails.

He told the I-Team of ABC7 Chicago, “They doctored up emails from my assistant. They doctored it up to look like we had this nice exchange, back and forth, ordering all of these things.”

Originally, Benach’s credit card company ruled that the charges were valid. It was only after months of exchanges and getting attorneys and the media involved that they eventually determined that the charges were fraudulent.

Benach’s case serves as a strong reminder for businesses to monitor all financial accounts closely. If you notice fraudulent charges, act quickly. Many banks even offer text or push notifications to alert you when new charges are made.

Additionally, this type of sophisticated fraud, where scammers even provide proof of fake interactions, means businesses may also need to track their own interactions with vendors and others to dispute these points if necessary.

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