An ISP Scam Targeted Low-Income People Seeking Government Aid

Traxler’s scam lasted from May to August 2021, during which he “repeatedly engaged in conduct that violated the federal wire fraud statute and the Commission’s rules,” the FCC said. The proposed $220,210 forfeiture penalty is “the statutory maximum we can impose, and reflects the scope, duration, seriousness, and egregiousness of Cleo’s apparent violations,” according to the commission.

When Cleo applied to be in the EBB program, the FCC initially told the entity that its application would be “denied as it lacks sufficient information for approval.” But Cleo subsequently gained FCC approval by offering documents including copies of two invoices “with customer-identifying information removed, which Cleo claimed was 'due to CPNI and privacy.’” Cleo also claimed to the FCC that it “had been providing high-speed wireless Internet” to 500 customers.

Dozens of Nearly Identical Complaints

The FCC said it reviewed 41 complaints about Cleo, all of which “focused on the same types of allegations. According to the complaints, consumers searched the list of participating EBB Program providers through individual states’ Universal Service or EBB Program websites, the FCC website, or USAC’s [Universal Service Administrative Company] website and followed links to Cleo’s website. The complaints alleged that Cleo accepted payment for EBB Program discounted broadband services or connected devices from these consumers electronically, failed to send the ordered product or provide the requested services, and then failed to provide refunds.”

The FCC interviewed eight of the consumers who filed complaints, who live in Alabama, Arizona, Colorado, Illinois, Massachusetts, New York, Washington state, and Wisconsin.

An Illinois woman ordered a laptop from Cleo for $50 using the Venmo payment service. The woman got no response when she contacted Cleo to report that she never received the laptop, the FCC said. She then “attempted to reach out to Cleo via social media (Facebook) and by telephone, but Cleo did not respond and blocked her both on Facebook and telephone,” the FCC said.

A New York woman “ordered an EBB Program-discounted tablet, laptop, ‘Wi-Fi box,’ and hotspot service from Cleo’s website on July 13, 2021, and arranged payment of $108.94 on the website through PayPal,” the FCC said. This consumer “told Bureau staff that she e-mailed Cleo when she did not receive the devices she ordered and that Cleo staff were ‘rude to her and told her they didn’t have to provide service to her.’ She said someone at Cleo told her to ‘read the fine print.’ She exchanged a few e-mails with Cleo until it ultimately stopped responding.”

Other complainants similarly said that Cleo stopped responding to messages seeking information on the devices they never received. Some of the consumers were able to cancel payments made via credit card or PayPal.

“The eight consumers interviewed by the Bureau and other consumers who filed complaints with the FCC’s Consumer Complaint Center all stated that Cleo did not deliver the EBB Program-supported services or devices they ordered, and the company refused to issue refunds. Some consumers stated in their complaints that Cleo claimed it would sue them when they asked for a refund,” the FCC said.

Shady Terms of Service Forbade Refunds

The terms of service that Cleo cited when denying refunds said the company “does NOT nor will ever imply or agree upon a refund, credits nor any other refunds of service and monies to be returned to you.”

“Cleo Communications operates a PREPAID Service. All services are sold as in [sic] and without warranty. Under NO circumstances does Cleo Communications represent any warranty nor provide a refund of any kind for services that are offered,” the terms state, according to the FCC. The Cleo terms additionally said that “charge backs to us via any customer bank is breach of contract at any time and is subject to further legal action up to but not limited to small claims court actions for breach of contract in the amount of what is disputed, any and all legal fees, court fees, attorney fees, filing fees, interest at 9.9%, and a contract breach fee in the amount of $300.00.”

Rude Responses: “You Will Be Taken to Court”

The FCC document detailed incidents in which Cleo responded to customers seeking refunds by threatening to sue or seek charges for harassment:

As examples, on August 2, 2021, when a customer e-mailed requesting a refund, Cleo responded, "[y]our wish to hide behind PayPal instead of contacting us. We will not be issuing you a refund. We will not be allowing you to use your benefits as we have claimed them. And you will be taken to Court. Cleo Care."

On August 10, 2021, when another customer requested a refund, Cleo responded, “Refund denied. Please see the terms of service that outline your rights and our obligations and rights that will be imposed. Also your EBB has been claimed. You will not use our credit anywhere else and you will be issued an invoice and to collections. Cleo Collections.” Cleo continued in a later e-mail with that customer by saying, "[n]ext time read before you order. As we will now no longer communicate. Any further e-mails will result in harassment charges in Ohio. Cleo Legal."

On August 12, 2021, Cleo stated to another customer, "[w]e are not ignoring you, nor are we charging you. You have requested a refund and refunds are not given and was informed of this and someone would decide of [sic] one would be issued or not. Please see- kyty.xyz/terms.html. Is what was sent to the FCC. With documents that you are and have not been ignored that your claims state [sic]. Cleo Legal Affairs.

This story originally appeared on Ars Technica.