Case4:11-cv YGR Document100 Filed04/10/12 Page1 of 54 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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1 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 KRONENBERGER ROSENFELD, LLP Karl S. Kronenberger (CA Bar No. ) Jeffrey M. Rosenfeld (CA Bar No. ) Virginia A. Sanderson (CA Bar No. 0) 0 Post Street, Suite San Francisco, CA 0 Telephone: () - Facsimile: () - karl@krinternetlaw.com jeff@krinternetlaw.com ginny@krinternetlaw.com Attorneys for Plaintiffs AMBER KRISTI MARSH AND STACIE EVANS UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA AMBER KRISTI MARSH and STACIE EVANS, individually and on behalf of a class of similarly situated persons, vs. Plaintiffs, ZAAZOOM SOLUTIONS, LLC, a Delaware Limited Liability Company; ZAZA PAY LLC, a Delaware Limited Liability Company dba Discount Web Member Sites, LLC, Unlimited Local Savings, LLC, Web Discount Club, Web Credit Rpt. Co., MegaOnlineClub, LLC, and RaiseMoneyForAnything; MULTIECOM, LLC, a Colorado Limited Liability Company dba Online Discount Membership, Web Discount Company, and Liberty Discount Club; ONLINE RESOURCE CENTER, LLC, a Delaware Limited Liability Company dba Web Coupon Site, USave Coupon, and UClip; FIRST BANK OF DELAWARE, a Delaware Corporation; FIRST NATIONAL BANK OF CENTRAL TEXAS, a Texas Corporation; Case No. :-cv-0-ygr CLASS ACTION Case No. :-cv-0-ygr FOR: VIOLATION OF BUS. & PROF. C. 0 VIOLATION OF U.S.C. 0 et seq. CONVERSION NEGLIGENCE STATUTORY NEGLIGENCE UNDER COM. C. 0 DEMAND FOR JURY TRIAL

2 Case:-cv-0-YGR Document00 Filed0/0/ Page of JACK HENRY & ASSOCIATES, INC., a Delaware Corporation dba PROFITSTARS; AUTOMATED ELECTRONIC CHECKING, INC., a Nevada Corporation; DATA PROCESSING SYSTEMS, LLC, a Delaware Limited Liability Company; and DOES -0, inclusive, Defendants. 0 Case No. :-cv-0-ygr

3 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 Plaintiffs Amber Kristi Marsh and Stacie Evans bring this action individually and on behalf of a class of similarly situated persons, by and through their undersigned counsel, and allege as follows: INTRODUCTION. This complaint addresses Defendants theft of money from those who need it the most. Defendants Zaazoom Solutions, LLC, Zaza Pay LLC, MultiECom, LLC, and Online Resource Center, LLC (collectively, the Zaazoom Defendants ) operate a scam where they lure people into applying for payday loans on Internet websites. The Zaazoom Defendants take the information they gather from the payday loan applications including the applicants banking information and use this information to forge checks on behalf of the applicants. These checks are fakes; they are created without the applicants knowledge or consent. These checks supposedly pay for the Zaazoom Defendants online coupon services, though no applicant ever agreed to buy such services. In fact, the idea that a cash-strapped, payday loan applicant would spend money on the Zaazoom Defendants coupon service, the purpose of which is to encourage a person to spend additional money with the Zaazoom Defendants coupons, is absurd. The money is transferred from the applicants checking accounts to the Zaazoom Defendants before the applicants realize that the forged checks have been drawn or that withdrawals have been made. The Zaazoom Defendants have performed this scam over a million times, and have robbed people in a frail financial condition of their remaining money.. Defendants Jack Henry & Associates, Inc. ( Jack Henry ), Automated Electronic Checking, Inc. ( AEC ), and Data Processing Systems, LLC ( DPS, and collectively the Processors ) and Defendants First Bank of Delaware ( FBOD ) and First National Bank of Central Texas ( FNBOCT, and collectively the Depositary Banks ) served as the payment processors and depositary banks for the Zaazoom Defendants. The Processors and Depositary Banks provided material assistance to the Zaazoom Defendants knowing that, or in reckless disregard of the fact that, the Zaazoom Defendants were engaging in wrongful and unlawful conduct. Case No. :-cv-0-ygr

4 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. Plaintiffs Stacie Evans and Amber Kristi Marsh separately applied for payday loans on different payday loan websites in November 0 and January, respectively.. As part of the online application process, each Plaintiff entered her personal information into the payday loan website, including her checking account number and bank routing number.. During the application process, both Plaintiffs specifically avoided registering for any third party offers that were advertised on the payday loan websites.. On information and belief, these payday loan websites were operated by affiliates of the Zaazoom Defendants, who had contracted with the Zaazoom Defendants to obtain personal information from applicants and transmit that information to the Zaazoom Defendants.. Without Plaintiffs knowledge or consent, the Zaazoom Defendants affiliates obtained Plaintiffs personal information from the payday loan websites. The Zaazoom Defendants affiliates then transferred Plaintiffs personal information to the Zaazoom Defendants.. Without Plaintiffs knowledge or consent, the Zaazoom Defendants used Plaintiffs personal information to register Plaintiffs for the Zaazoom Defendants online coupon services.. However, Plaintiffs had never heard of the Zaazoom Defendants coupon services, let alone registered for these services. 0. The Zaazoom Defendants then transferred Plaintiffs personal information to the Processors, and the Processors used that information to draft remotely created checks from Plaintiffs checking accounts payable to the Zaazoom Defendants. Plaintiffs never authorized the Zaazoom Defendants or the Processors to draft these checks.. The Processors deposited the checks in accounts with the Depositary Banks in the name of the Processors.. The Depositary Banks authenticated the remotely created checks and sent the checks to Plaintiffs banks for settlement. Case No. :-cv-0-ygr

5 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. The Processors and Depositary Banks acted unreasonably in drafting, depositing, authenticating, and collecting the checks given their knowledge of the extremely suspicious circumstances surrounding the checks.. As a result of Defendants misconduct, Plaintiffs and those similarly situated to Plaintiffs have been damaged.. Defendants have engaged in this same misconduct with respect to over a million other individuals who are similarly situated to Plaintiffs, where: a) these individuals applied for a loan on a payday loan website where they entered their checking account information, b) these individuals never authorized Defendants to draft remotely created checks from their checking accounts, c) Defendants used the individuals personal information to draft remotely created checks without the individuals authorization, and d) Defendants deposited these remotely created checks. JURISDICTION AND VENUE. This Court has subject matter jurisdiction over this matter under U.S.C. (d) because the matter in controversy exceeds the sum or value of $,000,000 exclusive of interest and costs, and this matter is a class action in which a member of the class of Plaintiffs is a citizen of a different State from one or more of Defendants. The exceptions to jurisdiction set forth in U.S.C. (d)() do not apply because greater than two thirds of the members of all proposed Plaintiff classes in the aggregate are not citizens of California and no Defendant is a citizen of California.. This Court has personal jurisdiction over Defendants because a substantial part of Defendants misconduct that gave rise to this action occurred in California.. This Court is a proper venue under U.S.C. because this Court is in a judicial district in which a substantial part of the events or omissions giving rise to the claims occurred, and because Defendants are subject to personal jurisdiction in this district. Case No. :-cv-0-ygr

6 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 PARTIES. On information and belief, Defendant Zaazoom Solutions, LLC ( Zaazoom ) is a Delaware limited liability company with its principal office in Scottsdale, Arizona.. On information and belief, Defendant Zaza Pay LLC ( Zaza Pay ) is a Delaware limited liability company with its principal office in Scottsdale, Arizona.. On information and belief, Zaazoom is the sole member and principal of Zaza Pay.. On information and belief, Zaza Pay operates under the fictitious business names Discount Web Member Sites, LLC; Unlimited Local Savings, LLC; Web Discount Club; Web Credit Rpt. Co.; MegaOnlineClub, LLC; and RaiseMoneyForAnything.. On information and belief, Defendant MultiECom, LLC is a Colorado limited liability company with its principal office in Scottsdale, Arizona.. On information and belief, Zaza Pay is the sole member and principal of MultiECom, LLC.. On information and belief, MultiECom, LLC operates under the fictitious business names Online Discount Membership, Web Discount Company, and Liberty Discount Club.. On information and belief, Defendant Online Resource Center, LLC is a Delaware Limited Liability Company with its principal office in Scottsdale, Arizona.. On information and belief, Zaza Pay is the sole member and principal of Online Resource Center, LLC.. On information and belief, Defendant Online Resource Center, LLC operates under the fictitious business names Web Coupon Site, USave Coupon, and UClip.. On information and belief, Defendant First Bank of Delaware is a Delaware corporation and a Delaware chartered bank based in Wilmington, Delaware. 0. On information and belief, Defendant First National Bank of Central Texas is a Texas corporation and a national bank based in Waco, Texas. Case No. :-cv-0-ygr

7 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. On information and belief, Defendant Jack Henry & Associates, Inc. is a Delaware corporation based in Monett, Missouri. On information and belief, Jack Henry & Associates, Inc. conducts business under the name of one of its divisions, ProfitStars.. On information and belief, Defendant Automated Electronic Checking, Inc. is a Nevada corporation based in Reno, Nevada.. On information and belief, Defendant Data Processing Systems, LLC is a Delaware limited liability company based in Riverdale, New York.. Plaintiff Amber Kristi Marsh is an individual residing in Palm Desert, California.. Plaintiff Stacie Evans is an individual residing in Palmdale, California.. Plaintiffs are uncertain of the true names and capacities of those defendants sued by the fictitious names DOES through 0, who also are responsible and liable for the injuries alleged in this third amended complaint and who proximately caused damages to Plaintiff and the members of the Class. Plaintiffs will amend this complaint to add the true names and capacities of the DOES when they become known.. Upon information and belief, at all times all Defendants were the principals, agents, affiliates, partners, and/or co-conspirators of each other, and each acted within the course, scope, and authority of such relationships so that, as a result, all Defendants are jointly and severally liable for the acts alleged herein. FACTUAL ALLEGATIONS Remotely Created Checks. A remotely created check is a check that is not created by the paying bank and that does not bear the signature of the payor. Rather, a remotely created check is a check that: a) is created by the payee, b) is drawn on the payor s bank account, and c) does not bear the signature of the payor in the format agreed to between the paying bank and payor. Case No. :-cv-0-ygr

8 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. A remotely created check is typically created when the holder of a checking account (the payor) authorizes a payee to draft a check on the payor s account, but where the payor does not actually sign the check. 0. In place of the signature of the payor, a remotely created check typically bears the customer s printed or typed name or bears a statement that the payor has authorized the check.. Thus, with the payor s authorization, the payee may create a remotely created check payable to itself. Instead of obtaining the payor s actual signature on the check, the payee inserts the statement that the payor has authorized the remotely created check. The payee then deposits the remotely created check in the payee s bank account.. After evaluating the authenticity of the check, the payee s bank sends the remotely created check to the payor s bank for settlement. If the payor s bank accepts the check, it will provide the funds identified in the check to the payee s bank. The payee s bank, in turn, will deposit those funds in the payee s account. All of these steps may occur before the payor sees the remotely created check or even knows that a withdrawal has been made from his or her bank account.. Remotely created checks can be a useful payment device. For example, a debtor can authorize a service provider to draft a remotely created check by telephone, which may enable the debtor to pay his or her bill in a timely manner and avoid late charges.. On the other hand, remotely created checks are particularly vulnerable to fraud for numerous reasons, including that fact that: a. They do not bear the payor s signature or other readily verifiable indication of authorization; b. The funds can be withdrawn from the payor s account before the payor knows that the remotely created check was generated; c. Remotely created checks are easy to create, requiring only a computer and printer; and d. The payee does not need special access to the banking system, as is the Case No. :-cv-0-ygr

9 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 case with ACH transactions.. The risk of fraud associated with remotely created checks has been recognized for over years. In prepared testimony before the House Banking Committee on April,, the Director of the Bureau of Consumer Protection of the Federal Trade Commission ( FTC ) warned that remotely created checks are the favorite method of fraudulent actors for taking consumers money through fraudulent telemarketing and other scams. See Demand Draft Fraud, available at That same year, California was one of the first States to establish rules governing demand drafts and to specify liability for unauthorized demand drafts. See SB (- Leg. Sess.). The legislative history of SB noted the growing use of demand drafts by telemarketing fraud operators, and the legislation modified the Commercial Code to shift the risk of loss from unauthorized demand drafts from the payor bank to the depositary bank. The rationale for this risk-shifting was that [t]he depository bank, which is charged with knowing its customer, is in the best position to avoid the introduction into the check collection system of an unauthorized demand draft by scrutinizing the customers allowed to deposit those drafts.. In 0, the Canadian Payments Association banned the use of remotely created checks in the Canadian banking system due to the high risk of fraud that they pose. See CPA Policy Statement, Prohibition of Tele-cheques in the Clearing & Settlement System, June, 0, available at In March of 0, the Federal Reserve acknowledged that remotely created checks are vulnerable to fraud because they do not bear a signature or other readily verifiable indication of authorization, that there have been significant consumer and bank complaints identifying cases of alleged fraud using remotely created checks, and submitted a request for comments on proposed regulations governing the use of these checks. See March, 0 Federal Reserve Release and attached Federal Register notice, available at Case No. :-cv-0-ygr

10 Case:-cv-0-YGR Document00 Filed0/0/ Page0 of 0 In response to the Federal Reserve s request for comment, the Attorneys General of thirty-five states (including California) and the District of Columbia stated their position that demand drafts are frequently used to perpetrate fraud on consumers and that such drafts should be eliminated in favor of electronic funds transfers that can serve the same payment function. See May, 0 Letter from National Association of Attorneys General to the Board of Governors of the Federal Reserve System, available at 0. Based on these findings, the FTC, the banking community, and lawmakers have recognized that with remotely created checks, the burden of ensuring that the check is authorized is properly placed on the bank whose customer deposited the check. This is true because this bank i.e. the depositary bank is in the best position to detect fraud, and this burden provides an economic incentive for the depositary bank to monitor customers that deposit remotely created checks, and thus, to limit the number of fraudulent remotely created checks that are introduced into the check collection system. Thus, the depositary bank has a duty to examine a remotely created check for authenticity before sending the check to the paying bank for settlement.. Despite regulations on the use of remotely created checks, scam artists have continued to find them to be an invaluable tool in perpetrating their fraud. See, e.g., Bilking the Elderly, With a Corporate Assist The New York Times, Charles Duhigg, May, 0, available at r= Check Return Rates. If a remotely created check is not honored by the paying bank, the check is deemed returned.. A remotely created check may be returned for a variety of reasons, including where the drawer account does not exist or is closed, where the drawer account has insufficient funds to settle the check, or where the check is a forgery or otherwise fraudulent. Case No. :-cv-0-ygr

11 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. For the past several years, the Federal Reserve has reported that the average total return rate for checks is about 0.%. According to the FTC, [a] red flag indicating unlawful debiting is a high rate of consumers and their banks rejecting and returning transactions submitted for debiting.. The FTC has also found that excessive return rates provide obvious signs that the merchants, processors, and banks are engaged in dubious practices. (emphasis added). The Zaazoom Defendants Misappropriated Personal Information and Drafted Fraudulent Remotely Created Checks Using that Information. The Zaazoom Defendants provide online coupon services though various Internet websites, including but not limited to <libertydiscountclub.com>, <discountclub.com>, <discountclub.com>, <grocerysavingsdirect.com>, <couponsinyourmailbox.com>, <websavingsclub.com>, <savingclub.com>, <discountclub.com>, and <uclipusave.com> (collectively, the Zaazoom Defendants Websites ).. Members of the Zaazoom Defendants Websites can download and/or print coupons from these websites, which can then be redeemed with various merchants.. Theoretically, a person can sign up to become a member of one of the Zaazoom Defendants Websites by entering his or her name, address, address, and phone number into the website s application screen. Additionally, the person must enter his or her checking account number and bank routing number into the websites application screen. Once registered, the Zaazoom Defendants work with processors to draft remotely created checks from the member s checking account to pay for the Zaazoom Defendants coupon services. Instead of checking account information, a user of one of Defendants Websites can enter credit card information; however the default setting is for the user to enter his or her checking account information. Case No. :-cv-0-ygr

12 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 0. Despite the foregoing process, the vast majority if not all members of the Zaazoom Defendants Websites did not become members voluntarily. Rather, the Zaazoom Defendants registered most people without their knowledge or consent.. In particular, the Zaazoom Defendants obtained information regarding individuals ( Applicants ) from various websites that allow individuals to apply for shortterm cash advances, all referred to as payday loans or paycheck loans (collectively, the Payday Loan Websites ).. On information and belief, the Payday Loan Websites were created, maintained, and operated by the Zaazoom Defendants affiliates. The affiliates are third parties with whom the Zaazoom Defendants contracted to collect Applicants personal information through the operation of the Payday Loan Websites and to transmit that information to the Zaazoom Defendants.. When applying for a payday loan on a Payday Loan Website, an Applicant was required to enter his or her personal information, including, name, address, address, and telephone number. Additionally, an Applicant was required to enter his or her checking account number and bank routing number. The Payday Loan Websites would not allow the Applicant to proceed with the application process unless a valid checking account number and bank routing number were entered. With varying language, the Payday Loan Websites stated that the Applicant s checking account information was necessary to fund the loan.. Without the Applicants knowledge or consent, the operators of the Payday Loan Websites transferred the Applicants personal information including the Applicants checking account information to the Zaazoom Defendants.. On information and belief, the Zaazoom Defendants knew that the Applicants had not consented to: a) registering for the Zaazoom Defendants Websites, A payday loan (also called a paycheck advance or payday advance) is a small, shortterm loan intended to cover immediate expenses until the loan applicant s next paycheck arrives, where payment and repayment are made directly to and from the recipient s checking account. Case No. :-cv-0-ygr 0

13 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 b) having their personal information transferred to the Zaazoom Defendants, or c) having remotely created checks drafted from their checking accounts to pay for the Zaazoom Defendants online coupon services.. Without the Applicants knowledge or consent, the Zaazoom Defendants used the Applicants personal information to register the Applicants for memberships with the Zaazoom Defendants Website(s).. The Applicants never consented to registering for any membership with any of the Zaazoom Defendants Websites.. On information and belief, the Zaazoom Defendants knew that the Applicants had not consented to registering for any membership with any of the Zaazoom Defendants Websites.. Without the Applicants knowledge or consent, the Zaazoom Defendants sent the Applicants personal information to one of the Processors. The Processors used the Applicant s personal information to draft remotely created checks from the Applicants checking accounts payable to the Zaazoom Defendants. The Applicants were unaware that the Zaazoom Defendants and the Processors were drafting or depositing these remotely created checks. 0. On information and belief, the Processors deposited these remotely created checks in accounts with the Depositary Banks held in the names of the Processors and not held in the name of the Zaazoom Defendants.. The Depositary Banks authenticated these checks as legitimate and then sent them to the Applicants banks for settlement.. In drafting, depositing, authenticating, and collecting the remotely created checks payable to the Zaazoom Defendants, the Processors and Depositary Banks were aware of extremely suspicious circumstances surrounding the checks, including an excessive return rate, a high number of customer complaints, inquiries from government agencies and consumer watchdogs about the Zaazoom Defendants, and peculiarities regarding the face of the actual checks. Case No. :-cv-0-ygr

14 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. The return rate for the Zaazoom Defendants remotely created checks was extraordinarily high, exceeding 0%, or over 00 times the national average for returned checks.. As a result of the Zaazoom Defendants misconduct, money was wrongfully withdrawn from the Applicants bank accounts. The Involvement of DPS with the Zaazoom Defendants. In or around September 0, DPS entered into a contract with the Zaazoom Defendants whereby DPS agreed to serve as a payment processor for the Zaazoom Defendants.. On information and belief, in this capacity, DPS created and deposited in its own depositary bank account remotely created checks payable to the Zaazoom Defendants.. On information and belief, DPS also contracted with the other processors to create and deposit remotely created checks payable to the Zaazoom Defendants.. On information and belief, the Zaazoom Defendants transmitted the Applicants personal information to DPS. DPS then: a) used this information to draft remotely created checks payable to the Zaazoom Defendants, or b) transferred the Applicants information to other processors to create and deposit remotely created checks payable to the Zaazoom Defendants.. DPS served as the payment processor to the Zaazoom Defendants, or contracted with other processors on behalf of the Zaazoom Defendants, in connection with over. million remotely created checks payable to the Zaazoom Defendants, valued at over $ million. 0. On information and belief, DPS deposited the remotely created checks payable to the Zaazoom Defendants in depositary bank accounts held in the name of DPS. On information and belief, the Zaazoom Defendants did not have an account at any of the depositary banks where DPS deposited the checks. Case No. :-cv-0-ygr

15 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. While the remotely created checks were payable to the Zaazoom Defendants, on information and belief, none of the Zaazoom Defendants nor any employee, officer, or director of the Zaazoom Defendants endorsed the checks before they were deposited in accounts held in the name of DPS.. Of the more than. million remotely created checks, at least,000 were returned by the paying banks as non-payable.. The return rate for checks payable to the Zaazoom Defendants and processed by DPS or other processors with whom DPS contracted exceeded %.. Even before DPS experienced this % return rate, DPS had already filtered out % of the remotely created checks submitted by the Zaazoom Defendants as inadequate, making the effective return rate experienced by DPS for the Zaazoom Defendants remotely created checks in excess of %.. This return rate far exceeds any acceptable return rate by more than one hundred times.. On information and belief, DPS maintained and monitored aggregate data for the remotely created checks payable to the Zaazoom Defendants, including the total number of checks deposited, the total dollar amount deposited, the total number of returned checks, and the reasons for the returned checks.. On information and belief, DPS was notified when one of the remotely created checks payable to the Zaazoom Defendants was returned as not payable by the paying bank.. DPS performed a few rudimentary inquiries into the Zaazoom Defendants business practices before taking them on as a client. However, these basic inquiries were minimal at best, and fell well short of any reasonable inquiry into the bona fides of the Zaazoom Defendants.. Had DPS engaged in a reasonable inquiry into the Zaazoom Defendants, it would have quickly discovered their unlawful business practices. Case No. :-cv-0-ygr

16 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 0. For example, had DPS spent a minute searching the Zaazoom Defendants on the Internet, DPS would have discovered a tremendous number of consumer complaints about the Zaazoom Defendants and their business practices.. Moreover, had DPS reviewed the websites of the Better Business Bureau, Ripoff Report, Complaints Board, or other consumer watchdogs, DPS would have found manifest signs that the Zaazoom Defendants operated a scam, including F ratings by the BBB for the Zaazoom Defendants coupon services. DPS would have also discovered that the BBB had stated that [t]he company has failed to respond to the majority of complaints and has failed to correct the underlying cause of these complaints.. On information and belief, at the time DPS contracted with the Zaazoom Defendants, DPS was aware of the Zaazoom Defendants extremely questionable business practices: i.e. supposedly asking consumers who applied for payday loans to enroll in an expensive online coupon service.. On information and belief, while DPS served as a payment processor for the Zaazoom Defendants, DPS learned of numerous consumer complaints and government inquiries about the Zaazoom Defendants. Rather than taking these complaints as a warning sign of the Zaazoom Defendants unlawful business practices, DPS continued to process remotely created checks for the Zaazoom Defendants. In fact, DPS counseled the Zaazoom Defendants on how to continue operating after receiving numerous complaints.. On information and belief, DPS received the funds identified in the remotely created checks in its own depositary accounts. On information and belief, DPS then remitted those funds to the Zaazoom Defendants minus a processing fee.. Because DPS earned a per-check processing fee for the remotely created checks payable to the Zaazoom Defendants, DPS had a financial interest in perpetuating the Zaazoom Defendants unlawful business practices. Case No. :-cv-0-ygr

17 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. DPS knew that thousands of purported drawers of the remotely created checks made payable to the Zaazoom Defendants had reported that the checks were forgeries to the paying banks.. Based on all of these suspicious circumstances, DPS knew or should have known that the Zaazoom Defendants were engaging in wrongful and unlawful conduct.. Despite this knowledge, DPS created and deposited remotely created checks payable to the Zaazoom Defendants and worked with other processors to accomplish the same.. As a result of DPS s misconduct, money was wrongfully withdrawn from the Applicants bank accounts. The Involvement of Jack Henry with the Zaazoom Defendants 00. Jack Henry served as a payment processor for the Zaazoom Defendants. 0. On information and belief, in or around November 0, DPS and/or the Zaazoom Defendants engaged Jack Henry to serve as a payment processor for the Zaazoom Defendants. 0. In this capacity, Jack Henry created and deposited remotely created checks payable to the Zaazoom Defendants. 0. On information and belief, the Zaazoom Defendants, either directly or through DPS, transmitted the Applicants personal information to Jack Henry. 0. On information and belief, Jack Henry used the Applicants personal information to create and deposit remotely created checks payable to the Zaazoom Defendants. On information and belief, Jack Henry deposited these checks in an account at FNBOCT held in Jack Henry s name. 0. On information and belief, the Zaazoom Defendants did not have a depositary account with FNBOCT. 0. While the checks drafted by Jack Henry were payable to the Zaazoom Defendants, on information and belief, none of the Zaazoom Defendants nor any employee, officer, or director of the Zaazoom Defendants endorsed the remotely Case No. :-cv-0-ygr

18 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 created checks drafted and deposited by Jack Henry. Nonetheless, on information and belief, Jack Henry deposited these checks in an account with FNBOCT held in Jack Henry s name. 0. Jack Henry served as the payment processor to the Zaazoom Defendants in connection with over,000 remotely created checks. 0. On information and belief, Jack Henry maintained and monitored aggregate data for the remotely created checks it drafted and made payable to the Zaazoom Defendants, including the total number of checks deposited, the total dollar amount deposited, the total number of returned checks, and the reasons for the returned checks. 0. On information and belief, Jack Henry was notified when one of the remotely created checks it drafted and made payable to the Zaazoom Defendants was returned as not payable by the paying bank. 0. On information and belief, of the more than,000 remotely created checks Jack Henry drafted and made payable to the Zaazoom Defendants, at least,000 were returned by the paying banks as non-payable.. The return rate for the checks drafted by Jack Henry and made payable to the Zaazoom Defendants exceeded %.. This return rate exceeded any acceptable return rate by more than one hundred times.. Had Jack Henry engaged in a reasonable inquiry into the Zaazoom Defendants, it would have quickly discovered their unlawful business practices.. For example, had Jack Henry spent a minute searching the Zaazoom Defendants on the Internet, Jack Henry would have discovered a tremendous number of consumer complaints about the Zaazoom Defendants and their business practices.. Moreover, had Jack Henry reviewed the websites of the Better Business Bureau, Ripoff Report, Complaints Board, or other consumer watchdogs, Jack Henry would have found manifest signs that the Zaazoom Defendants operated a scam, including F ratings by the BBB for the Zaazoom Defendants coupon services. Jack Case No. :-cv-0-ygr

19 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 Henry would have also discovered that the BBB had stated that [t]he company has failed to respond to the majority of complaints and has failed to correct the underlying cause of these complaints.. On information and belief, Jack Henry received the funds identified in the remotely created checks it drafted and deposited in its depositary account with FNBOCT. On information and belief, Jack Henry remitted those funds, minus a processing fee, to DPS, which in turn, remitted those funds, minus a fee, to the Zaazoom Defendants.. On information and belief, because Jack Henry earned a per-check processing fee for the remotely created checks it drafted payable to the Zaazoom Defendants, Jack Henry had a financial interest in perpetuating the Zaazoom Defendants unlawful business practices.. Jack Henry knew that thousands of purported drawers of the remotely created checks payable to the Zaazoom Defendants had reported that the checks were forgeries to the paying banks.. Based on these circumstances, Jack Henry knew or should have known that the Zaazoom Defendants were engaging in wrongful and unlawful conduct.. Despite this knowledge or in reckless disregard of the truth Jack Henry continued to create and deposit remotely created checks made payable to the Zaazoom Defendants.. As a result of Jack Henry s misconduct, money was wrongfully withdrawn from the Applicants bank accounts. The Involvement of AEC with the Zaazoom Defendants. AEC served as a payment processor for the Zaazoom Defendants.. On information and belief, in or around December 0, DPS and/or the Zaazoom Defendants engaged AEC to serve as a payment processor for the Zaazoom Defendants.. In this capacity, AEC created and deposited remotely created checks payable to the Zaazoom Defendants. Case No. :-cv-0-ygr

20 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. On information and belief, the Zaazoom Defendants, either directly or through DPS, transmitted the Applicants personal information to AEC.. On information and belief, AEC used the Applicants personal information to create and deposit remotely created checks payable to the Zaazoom Defendants. On information and belief, AEC deposited these checks in an account at SunFirst Bank held in AEC s name.. On information and belief, the Zaazoom Defendants did not have a depositary account with SunFirst Bank.. While the checks drafted by AEC were payable to the Zaazoom Defendants, on information and belief, none of the Zaazoom Defendants nor any employee, officer, or director of the Zaazoom Defendants endorsed the remotely created checks drafted and deposited by AEC. Nonetheless, on information and belief, AEC deposited these checks in an account with SunFirst Bank held in AEC s name.. AEC served as the payment processor to the Zaazoom Defendants in connection with over,000 remotely created checks. 0. On information and belief, AEC maintained and monitored aggregate data for the remotely created checks it drafted and made payable to the Zaazoom Defendants, including the total number of checks deposited, the total dollar amount deposited, the total number of returned checks, and the reasons for the returned checks.. On information and belief, AEC was notified when one of the remotely created checks it drafted and made payable to the Zaazoom Defendants was returned as not payable by the paying bank.. On information and belief, of the more than,000 remotely created checks AEC drafted and made payable to the Zaazoom Defendants, at least 0,000 were returned by the paying banks as non-payable.. The return rate for checks drafted by AEC and made payable to the Zaazoom Defendants exceeded 0%. Case No. :-cv-0-ygr

21 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. This return rate exceeded any acceptable return rate by more than one hundred times.. Had AEC engaged in a reasonable inquiry into the Zaazoom Defendants, it would have quickly discovered their unlawful business practices.. For example, had AEC spent a minute searching the Zaazoom Defendants on the Internet, AEC would have discovered a tremendous number of consumer complaints about the Zaazoom Defendants and their business practices.. Moreover, had AEC reviewed the websites of the Better Business Bureau, Ripoff Report, Complaints Board, or other consumer watchdogs, AEC would have found manifest signs that the Zaazoom Defendants operated a scam, including F ratings by the BBB for the Zaazoom Defendants coupon services. AEC would have also discovered that the BBB had stated that [t]he company has failed to respond to the majority of complaints and has failed to correct the underlying cause of these complaints.. On information and belief, AEC received the funds identified in the remotely created checks it drafted and deposited in its depositary account with SunFirst Bank. On information and belief, AEC then remitted those funds, minus a processing fee, to DPS, which in turn, remitted those funds, minus a fee, to the Zaazoom Defendants.. Because, on information and belief, AEC earned a per-check processing fee for the remotely created checks it drafted and made payable to the Zaazoom Defendants, AEC had a financial interest in perpetuating the Zaazoom Defendants unlawful business practices. 0. AEC knew that thousands of purported drawers of the remotely created checks made payable to the Zaazoom Defendants had reported that the checks were forgeries to the paying banks.. Based on these circumstances, AEC knew or should have known that the Zaazoom Defendants were engaging in wrongful and unlawful conduct. Case No. :-cv-0-ygr

22 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. Despite this knowledge or in reckless disregard of the truth AEC continued to create and deposit remotely created checks made payable to the Zaazoom Defendants.. As a result of AEC s misconduct, money was wrongfully withdrawn from the Applicants bank accounts. The Involvement of FBOD with the Zaazoom Defendants. FBOD served as the depositary bank for one or more payment processors used by the Zaazoom Defendants.. In this capacity, FBOD accepted remotely created checks for deposit, reviewed and authenticated those checks, sent those checks to the relevant drawee banks, and then accepted settled funds for those checks from the drawee banks.. On information and belief, FBOD agreed to accept checks made payable to the Zaazoom Defendants with the understanding that FBOD would receive a significant volume of checks i.e. hundreds of thousands.. On information and belief, as part of its standard practices, FBOD inquired into the Zaazoom Defendants check return rate before agreeing to accept remotely created checks made payable to them. On information and belief, as a result of this inquiry, FBOD learned that the Zaazoom Defendants had a check return rate well in excess of an acceptable rate.. On information and belief, FBOD had a financial incentive in working with a client with a high check return rate because FBOD received a fee for each returned check.. On information and belief, FBOD was aware of other concerning circumstances at the time it agreed to accept remotely created checks payable to the Zaazoom Defendants, but decided to accept such checks anyway. Included among these concerning circumstances were a high return rate, a large number of unauthorized and forged checks, numerous customer complaints about the Zaazoom Defendants, and Case No. :-cv-0-ygr

23 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 inquiries into the Zaazoom Defendants by other banks, consumer watchdogs, and/or government agencies. 0. On information and belief, before accepting checks made payable to the Zaazoom Defendants, FBOD also undertook a rudimentary investigation into the Zaazoom Defendants business practices. However, on information and belief, these basic inquiries were minimal at best, and fell well short of any reasonable inquiry into the bona fides of the Zaazoom Defendants.. Had FBOD engaged in a reasonable inquiry into the Zaazoom Defendants, it would have quickly discovered their unlawful business practices.. For example, had FBOD spent a minute searching the Zaazoom Defendants on the Internet, FBOD would have discovered a tremendous number of consumer complaints about the Zaazoom Defendants and their business practices.. Moreover, had FBOD reviewed the websites of the Better Business Bureau, Ripoff Report, Complaints Board, or other consumer watchdogs, FBOD would have found manifest signs that the Zaazoom Defendants operated a scam, including F ratings by the BBB for the Zaazoom Defendants coupon services. FBOD would have also discovered that the BBB had stated that [t]he company has failed to respond to the majority of complaints and has failed to correct the underlying cause of these complaints.. On information and belief, the Zaazoom Defendants never had a depositary account with FBOD. Thus, no remotely created checks were deposited in any account at FBOD that was held in the name of the Zaazoom Defendants.. On information and belief, a payment processor deposited checks made payable to the Zaazoom Defendants in accounts held in the name of the processor.. While the checks deposited with FBOD were payable to the Zaazoom Defendants, on information and belief, none of the Zaazoom Defendants nor any employee, officer, or director of the Zaazoom Defendants endorsed the remotely Case No. :-cv-0-ygr

24 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0 created checks deposited with FBOD. Nonetheless, FBOD accepted these checks for deposit, authenticated them, and sent them to the paying banks for settlement.. The lack of the Zaazoom Defendants endorsement, coupled with the lack of any actual signature by the drawer, made the remotely created checks suspicious on their face.. Moreover, the remotely created checks did not display the name or electronic signature of the purported drawer in the signature line. Instead, the remotely created checks deposited with FBOD stated NON-NEGOTIABLE Authorization On File, providing no indication that the purported drawer had authorized the check.. Despite the checks statement that they were non-negotiable, FBOD would have understood that the checks had in fact been negotiated i.e. FBOD would have understood that the checks had been transferred from the Zaazoom Defendants to the processor, who then became the checks holder and deposited them with FBOD. Specifically, the remotely created checks were not deposited by the Zaazoom Defendants with FBOD. Rather, they were deposited by a processor in an account at FBOD in the names of the processor. Thus, FBOD accepted the remotely created checks from a party other than the payee even though the face of the checks stated that the checks were non-negotiable. 0. Moreover, the remotely created checks deposited with FBOD displayed astronomically high check numbers, beyond the number of checks that any actual person could issue. As an example, one of Plaintiff Evans s purported checks deposited with FBOD displayed the check number,,.. The statement NON-NEGOTIABLE Authorization on File, coupled with the excessively high check numbers, further made the remotely created checks deposited with FBOD suspicious on their face.. FBOD served as a depositary bank for over 00,000 remotely created checks made payable to the Zaazoom Defendants. Case No. :-cv-0-ygr

25 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. On information and belief, all of the 00,000 remotely created checks suffered from the same facial defects described in this section.. On information and belief, FBOD maintained and monitored aggregate data for the remotely created checks payable to the Zaazoom Defendants, including the total number of checks deposited, the total dollar amount deposited, the total number of returned checks, and the reasons for the returned checks.. On information and belief, FBOD was notified when one of the remotely created checks payable to the Zaazoom Defendants was returned as not payable by the paying bank.. The return rate for the remotely created checks payable to the Zaazzom Defendants and deposited with FBOD exceeded 0%.. FBOD knew that the return rate for the Zaazoom Defendants remotely created checks far exceeded an acceptable return rate, by as much as 00 times.. FBOD knew that thousands of the purported drawers of the remotely created checks payable to the Zaazoom Defendants had reported that the checks were forgeries to their paying banks.. Under regulations promulgated by the Federal Deposit Insurance Corporation ( FDIC ), FBOD was required to file Suspicious Activity Reports with the Financial Crimes Enforcement Network of the Department of the Treasury upon identifying specified suspicious activity. 0. On information and belief, FBOD s receipt of the Zaazoom Defendants remotely created checks constituted suspicious activity that should have been reported in a Suspicious Activity Report.. On information and belief, had FBOD filed these Suspicious Activity Reports it would have learned about the unlawful conduct being perpetrated by the Zaazoom Defendants. Case No. :-cv-0-ygr

26 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. On information and belief, FBOD failed to file the necessary Suspicious Activity Reports, including reports related to the Zaazoom Defendants remotely created checks.. On information and belief, while FBOD served as a depositary bank for the remotely created checks payable to the Zaazoom Defendants, FBOD received consumer complaints about these remotely created checks, including consumer complaints stating that the checks were forgeries.. Based on these circumstances, FBOD knew or should have known the Zaazoom Defendants were engaging in wrongful and unlawful conduct.. Despite this knowledge, FBOD accepted for deposit remotely created checks payable to the Zaazoom Defendants, even though the Zaazoom Defendants did not have an account with FBOD.. As a result of FBOD s misconduct, money was wrongfully withdrawn from the Applicants bank accounts. The Involvement of FNBOCT with the Zaazoom Defendants. FNBOCT served as the depositary bank for one or more payment processors used by the Zaazoom Defendants.. In this capacity, FNBOCT accepted remotely created checks for deposit, reviewed and authenticated those checks, sent those checks to the relevant drawee banks, and then accepted settled funds for those checks from the drawee banks.. On information and belief, FNBOCT agreed to accept checks made payable to the Zaazoom Defendants with the understanding that FNBOCT would receive a significant volume of checks i.e. hundreds of thousands. 0. On information and belief, as part of its standard practices, FNBOCT inquired into the Zaazoom Defendants business practices, including their check return rate, before agreeing to accept remotely created checks made payable to them. Case No. :-cv-0-ygr

27 Case:-cv-0-YGR Document00 Filed0/0/ Page of 0. On information and belief, before accepting checks made payable to the Zaazoom Defendants, FNBOCT knew that the Zaazoom Defendants had a check return rate well in excess of an acceptable rate.. On information and belief, FNBOCT had a financial incentive in working with a client with a high check return rate because FNBOCT received a fee for each returned check.. On information and belief, FNBOCT was aware of concerning circumstances at the time it agreed to accept remotely created checks made payable to the Zaazoom Defendants, but proceeded to accept such checks anyway. Included among these concerning circumstances were a high return rate, a large number of unauthorized checks, and customer complaints.. On information and belief, before accepting checks made payable to the Zaazoom Defendants, FNBOCT undertook a rudimentary investigation into the Zaazoom Defendants business practices. However, these basic inquiries were minimal at best, and fell well short of any reasonable inquiry into the bona fides of the Zaazoom Defendants.. Had FNBOCT engaged in a reasonable inquiry into the Zaazoom Defendants, it would have quickly discovered their unlawful business practices.. For example, had FNBOCT spent a minute searching the Zaazoom Defendants on the Internet, FNBOCT would have discovered a tremendous number of consumer complaints about the Zaazoom Defendants and their business practices.. Moreover, had FNBOCT reviewed the websites of the Better Business Bureau, Ripoff Report, Complaints Board, or other consumer watchdogs, FNBOCT would have found manifest signs that the Zaazoom Defendants operated a scam, including F ratings by the BBB for the Zaazoom Defendants coupon services. FNBOCT would have also discovered that the BBB had stated that [t]he company has failed to respond to the majority of complaints and has failed to correct the underlying cause of these complaints. Case No. :-cv-0-ygr