Tuesday, February 14, 2006

StormPay Scandal Highlights Need for More Regulation Online

In the days since my last post about 12DailyPro, more attention has seemed to point more to StormPay as the company with the problems. So far, the admin of 12DP has been more forthcoming with members about what's been going on with the site and kept an open communication channel with them - something SP has failed to do. Their site has also been inaccessible for most of the time, something they attribute to DoS attacks. However, repeated phone calls by journalists (myself included) have gone unanswered and unreturned. The lack of any type of response from SP about the ongoing issues is of grave concern to many account holders of SP who have started contacting their banks, the news media, consumer advocacy groups and even law enforcement to try and remedy their situation. Just yesterday, a man from Utah flew to Tennessee with a crew from ABC4 to contact StormPay on his own. They spoke with the president of the company, Steve Grisky, who refused to let the interview be filmed because he has been receiving death threats. The internet community has been divided on which side is telling the truth in the matter of who has who's money and who is to blame. StormPay claims that they have not gone into any members bank accounts to withdrawal money, although they refused to explain who or which government agency was behind the initial investigation. This answer has still left many people with a bad taste in their mouth wondering who they can trust.

StormPay, along with PayPal and a host of other online payment processors are a new breed of systems designed to move money. PayPal was, of course, designed for use with eBay auctions in mind and was eventually purchased by eBay to act as their main payment system. Many people now use these systems as they would conventional payments such as cash or checks, just in a virtual settings. In an online setting, the only thing between your cash that the person at the other end if the payment processor. Unfortunately, these cybercash couriers are not regulated and are not subject to standard laws that banks would, leaving them open to abuse in many forms. Just recently, e-Gold was accused in an article in BusinessWeek of having the potential for terrorists to launder money due to the fact that it is virtually anonymous to move money between accounts, and there is no ability to cancel a transfer once you've sent money, leaving it open to hackers and scammers to rip account holders off like no other payment system in existence. These online payment processors can also freeze users accounts with no notice and hold funds indefinitely for whatever reason they deem to be appropriate.

Online payment processors, unlike banks, are not regulated by any government body, such as the FDIC, and thus are not protected from fraud, theft, or other problems that can occur. All banks that are insured by the FDIC have $100,000 insurance coverage on each account. It is subject to strict regulations and is meant to benefit customers and keep the banking system stable. However, in a global economy where money needs to be transferred instantly to all different parts of the world, new types of payment systems have popped up all over the place. Because of the lack of regulation, almost anyone can start one. All you need is a merchant account to process credit cards and withdrawal money from checking accounts. From there companies can make large amounts of money charging fees for transferring money between users accounts. Even the largest payment processor online, PayPal, has its share of critics. It's regular accounts are regulated by affiliated FDIC banks, but the Monkey Market accounts are not. At one point, PayPal had insurance backing in the event of theft and other problems, however I am not sure if this is still in place. I will try and determine if this is still true (if anyone knows, feel free to post in the comments). None the less, they are not regulated as strictly as banks, and many users have complained about their PayPal accounts being closed without warning and large sums of money being frozen with little or no recourse. Right now, the same thing is going on with StormPay customers, and they aren't happy about it. In a press release by the BBB, they state that over 18,000 inquiries worldwide have been made to them regarding StormPay and it's financial status and they are asking law enforcement to get involved.

No wonder, considering the huge revenue streams generated by Auto-surf HYIPs and their need to send and receive payments from customers. According to a recent posting by an HYIP, AlienTrust, it indicates that it could well be a multimillion dollar "industry".

"We will pursue legal action against StormPay Inc. for not only the 6.9 Million dollars you [StormPay] have stolen from us, but potential lost revenue for the future, and punitive damages as well."

If AlienTrust, a relatively new company, already has accumulated $6.9 million in profits as they claim, then a company a few years older such as 12DailyPro could theoretically be worth billions. StormPay was known to have a lax policy on MLM companies (at least until recently) and was used by many of them for the purpose of transferring money between accounts. However, StormPay is now claiming that outside investigations by the FBI and other law enforcement agencies into the practices of 12DailyPro and other auto-surfs caused them to freeze their accounts and begin to issue refunds to members who paid through SP for upgrades into 12DP.

In a recent series of articles, The Leaf Chronicle in Clarksville, Tennessee, has provided some details into the ongoings of 12DailyPro and StormPay. This is one of the few news mediums outside of Utah's ABC4 who has covered the story, most likely because StormPay is located in the town. However, in the last few days, larger news outlets like The Wall Street Journal and CNN have picked up the story. Most of the daily updates have come from the Chronicle and ABC4 who have more of a vested interest in the story.

As for individual accounts, the BBB is asking individuals who are having problems with StormPay to please contact their office at (615) 242-4222. Users from the talkgold forum have stated that they have contacted the Memphis Tennessee branch of the FBI and asked other individuals who have had money removed from their accounts or trouble dealing with the company to call them at (901) 747-4300 as well as the local Clarksville, TN police and speak to an employee named 'Trish' 1-888-245-7621, then 8, then 3 (I cannot verify this information currently). The CEO of StormPay is Steve Girsky, who is apparently a lawyer. Members are also asking for people to call in to complain to the TN State Bar Association at 1-800-486-5714. There has also been mention of a class action lawsuit pending against SP for all of these alleged infractions.

But, with all the speculation aside, it is hard to determine what to do and who to contact if your money is missing or you are concerned about the balance in your account.

RipOffReport has the following advice:


Go to your bank within 60 days of the charge, or as soon as you know about the charge, don't delay, and tell them that there has been fraudulent activity within your account. Explain that you wish to file a dispute, and demand that they assist you in accordance with Federal Regulation E.

According to the majority of victims interviewed by Rip-off Report, those who immediately called their banks to dispute the charges did not get very far. Many victims got the following responses from their banks: "we could not do anything for you" or "you waited too long; it has been more than 60 days".

If the bank is says that you have waited too long, explain to them how you called their 800 number as soon as the charges were found, and were told by the bank that nothing could be done. Remind the bank that they failed to assist you properly at the 800 #, and instead, provided you with an inadequate explanation of your right to dispute. Tell the bank that it's their fault time has expired, and since they gave you the wrong info to begin with, they will just have to deal with it, take the loss and reverse the charges.

Tell them the truth; this was unauthorized and your account was NOT to be charged! Keep emphasizing how you never authorized anything! Direct them to the hundreds of victims reports that were filed on Rip-off Report.com. And if you're at the bank, walk them over to their computer and make them go to this site! If you are on the phone with them, tell them you will wait while they access this site! Either way, be persistent!


Let them know nicely, that you were advised to Report them (the Bank) and this situation to the Banking Commission in your state. Since each state has a different name for the agency/controller over banks, find that name before you call or get to the bank so you can throw it in their face. The more knowledgeable you appear to be, the further you will get.

And just continue to demand the Federal Regulation E form! The bank CAN, MUST and WILL reverse the charge! But, you must be persistent; ask to speak to the supervisor or the area manager for all the branches in the state.

Let the bank personnel know you are meeting with the media later in the day, that you would much rather they do the right thing (as most other banks have) by looking at the complaints and immediately reversing the charge(s) to your account; no matter how long ago it was. Be sure to call the Media if necessary so you are telling the truth.

If you have to, be loud (but nice) in front of other customers. If you are just calling by phone, the above tactics should still work. The bank can easily fax or mail to you the Federal Regulation E dispute form.


If the charge was to your credit card (not debit card, check card, or checking account), contact the credit card company as soon as possible to request a dispute form. Consumers usually have a little longer to dispute fraudulent credit card charges (up to 6 months), but it is better to act right away. In this type of situation, credit card disputes are usually successful since fraudulent companies often won't contest the disputed charge. In rare cases, credit card companies will review disputes, but refuse to reverse the charges. If this occurs, complain to a manager and let them know you will be filing a report here.

Remember? Don't let them get away with it! Make sure they make the Rip-off Report .. The more Reports filed on a Company or individual, the more likely it is that the authorities, media and attorneys will want to take action.

And good luck? Let us know how you do!

ED Magedson ? Founder, Rip-off Report.com & Author of www.ripoffrevenge.com

Search Google News for "StormPay" for the latest headlines

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1 comment:

britney gibbons said...

mr girsky crossed a line you dont cross with a mother. his skeletons are about to be unleashed :) . all I have is time. no money but Im pretty pissed at him. even his facebook page is lame as hell. anyone who wants feel free to shoot me an email. britneypillowwars@gmail.com .

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