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US-based payment processor Stripe will pay $120,000 to resolve allegations that its fraud prevention system failed to detect illicit transactions made by the organizers of initial coin offering PlexCoin, the Massachusetts Attorney General's Office (AGO) announced last Friday.
In July, three Canadian citizens were charged with fraud in connection to PlexCoin, an initial coin offering allegedly used to defraud its investors of $8 million, according to the US Attorney’s Office in the Northern District of Ohio.
Among those investors, 22 turned out to be from Massachusetts, where the local AGO alleged that Stripe’s platform was used to transfer at least some of PlexCoin’s funds.
“Stripe processed payments facilitated by Dominic Lacroix – the owner of ‘PlexCoin’ – and his associates, resulting in the fraudulent and unregistered offer and sale of cryptocurrency,” said the assurance of discontinuance signed by Stripe and the AGO.
Additionally, the AGO alleged that Stripe’s fraud prevention systems proved to be inadequate and couldn’t efficiently detect illicit transactions.
“The AG’s Office further alleges that Stripe knew or should have known of Lacroix’s fraud in time to prevent harm to Massachusetts consumers, but failed to do so due to its inadequate risk monitoring and fraud prevention and mitigation practices and procedures,” the document stated.
To settle these allegations, Stripe agreed to pay $120,000 to the AGO that should be applied “for the amelioration of harm to Massachusetts consumers, investigative costs, and monitoring."
The document also stressed that none of these funds should be considered a penalty or a fine. Additionally, the agreement “does not constitute an admission by Stripe of any fact or non-compliance with any state or federal law, rule, or regulation."
On Stripe’s part, the settlement requires that the company’s security protocols will protect its customers in the future “as well as regular trainings (sic) for employees regarding risk monitoring and fraud prevention.”
In its turn, the AGO agreed to not take any actions against Stripe regarding the PlexCoin case.