A classic caper: W.H. Internet vendor who allegedly stole $5 million is charged with wire fraud

If you have ever bought anything from the now-defunct Internet clothing vendor Classic Closeouts LLC, double check your credit card charges: the business’s owner, Daniel Greenberg, was charged earlier this month with defrauding customers of his West Hempstead-based company of more than $5 million.

The U.S. attorney’s office arrested Greenberg on Sept. 2 and charged him with wire fraud after it discovered that he had allegedly charged victims’ credit cards or debited their bank accounts on more than 70,000 occasions without their authorization. According to the criminal complaint, without customers’ knowledge, Greenberg retained their credit and debit card information from earlier purchases and continued to charge the cards from June 2008 through at least December of that year.

The U.S. Department of Justice said in a statement that when victims disputed the unauthorized charges with their credit card companies and banks, Greenberg asserted that the charges were valid because the customers had enrolled in an alleged “frequent shopper club” that required a one-time charge. As a result, some credit card companies and banks declined to issue credits and victims were pressured into paying the fraudulent charges, plus late fees and interest.

“Thousands of unsuspecting former customers were victimized by the defendant,” said Loretta Lynch, U.S. attorney for the Eastern District of New York. “With this arrest and prosecution, the Closeout scheme has now been closed down.”

Lynch went on to thank the Federal Trade Commission, which had brought the matter to the U.S. attorney’s office after filing a parallel civil action, and assisted in the 18-month investigation.

According to an article in IDG News, the FTC reached a settlement with Greenberg in January, banning him from owning any Internet businesses that handle credit or debit accounts, and imposing a $2.1 million monetary judgement, even though Greenberg had filed for bankruptcy before the settlement.

The article went on to say that it is uncommon for the DOJ to bring criminal charges after the FTC settles a civil case against a defendant. It quoted Greenberg’s lawyer, Leo Kimmel, as saying that his client “denies having defrauded anyone.”

Greenberg appeared in Brooklyn federal court on Sept. 2, but his bail hearing was postponed for the following week.

If convicted, he faces a maximum sentence of 20 years in prison.