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The complaint specifically alleges that the defendants' primary role in the scheme was to help Keto marketers evade financial scrutiny and potential repercussions from credit card processors by artificially manipulating merchant chargeback ratios. Chargebacks, consumer-initiated requests to reverse credit card charges, typically alert banks and credit card companies to potential fraud or dissatisfaction. A high chargeback ratio can trigger audits, penalties, or even suspension of payment processing capabilities, severely impacting a business's operations.

The plaintiffs claim that Chargebacks911 used manipulative practices to hide the real extent of chargebacks, which are disputed customer payments. According to the lawsuit, the company allegedly created a large number of small, meaningless transactions, like selling $0.99 e-books. These transactions were often fake or arranged through other companies. By increasing the total number of transactions, the high number of actual chargebacks—caused by things like unauthorized charges or misleading marketing—was made to seem less significant in comparison.

In stark contrast, the defendants' formal response, filed on June 17, 2024, denies all allegations. Chargebacks911 acknowledges providing chargeback prevention services but emphasizes its operations are strictly legal, standard within the industry, and void of any fraudulent intent. They argue that any associations or services rendered to other companies mentioned in the complaint, represent standard commercial interactions consistent with legitimate business practices. Moreover, the defendants categorically deny manipulating merchant accounts or chargeback data to conceal consumer disputes.

However, this is not Cardone’s or Chargebacks911's first encounter with regulatory scrutiny. Earlier in April 2023, the Federal Trade Commission (FTC) and the Florida Attorney General brought action against Chargebacks911, Gary Cardone, and Monica Eaton, alleging they engaged in unfair business practices. The federal complaint accused the company of submitting misleading documentation to dispute consumer chargebacks, ignoring red flags, and artificially lowering merchant chargeback rates through microtransactions.

In that previous action, documented under case number 8:23-cv-00796-MSS-CPT, Chargebacks911 agreed to a stipulated order for permanent injunction and monetary penalties totaling $150,000 without admitting wrongdoing. The FTC and Florida Attorney General's allegations closely mirrored the current plaintiffs' claims, particularly regarding microtransactions and deceptive management of merchant accounts.