Michael Cotter had a problem: “Chargebacks” at his tech support company were too high. The reason for this was not hard to find; people at his company, Tech Live Connect, were scamming Cotter’s fellow Americans.
The scams usually began with a pop-up message warning that a user’s computer might have a virus. The pop-up then claimed to run a “scan” (which was always positive) of the computer and provided a toll-free number to call for more help. Those who called were connected to Tech Live Connect’s Indian call center, where they were asked for remote access to their computers, diagnosed with fake problems, and charged hundreds of dollars to “fix” them. Call center workers often pretended to be Apple or Microsoft employees.
Defrauded people complained in droves.
Even worse—they filed chargebacks with their credit card companies, disputing these payments. A high rate of chargebacks is usually a pretty good sign of fraud, and payment processors will often apply penalties or stop credit card acceptance altogether if chargeback ratios climb too high. By the middle of 2015, one payment processor was already warning that it could soon terminate five of Tech Live Connect’s merchant accounts over chargeback concerns.
To make the problem stop, Cotter could have clamped down on the fraud, of course, but this was where the money was. Cotter did claim that he had a policy of firing call center workers who conducted scams, but he eventually admitted that the policy “was not enforced consistently.” Repeat scammers at his company were in some cases promoted, not fired.
Instead, Cotter came up with a different approach to the chargeback problem, one that would fight concerns about fraud by… generating a lot more fraud.
Pay yourself first
In 2016, Cotter began purchasing virtual debit cards. Tech Live Connect then used the cards to pay fake invoices. Essentially, the company was paying itself. But it now looked like Tech Live Connect was processing many more legitimate charges, which diluted the impact of all those fraud claims. The chargeback ratio fell.
Payment processors aren’t idiots, and a huge number of new charges was likely to arouse suspicion. (Indeed, one processor suspected that Tech Live Connect was using “friendly” charges as early as 2018.) To make the charges look legitimate, Tech Live Connect processed them using real customer data, including names and addresses.
Once Tech Live Connect got its chargeback ratio low enough, it used this data to get more merchant accounts, allowing it to stay in business longer and for people there to scam new targets. Cotter eventually admitted that, by keeping his company open using this scheme, he defrauded Americans of an additional $8 million or so.
The scheme ran for four years, and it had to be managed every month. In March 2018, for instance, Cotter’s team realized that it needed 27,000 more “good” transactions that month to outweigh all the bad ones, so it spent $140,000 to acquire 3,000 virtual debit cards, which it then charged through six different payment gateways.
For a plan that involved giving money to yourself, this one proved surprisingly costly. By the time Tech Live Connect acquired the cards in bulk, which required third-party vendors, and then paid all processing charges, half of the money charged was gone.
Still, it was worth a few million dollars to keep the company in business. Tech Live Connect made significant cash—more than $13 million during the four years this system was in operation.
Payment processors grew suspicious despite Cotter’s tricks, and by 2020 the US Postal Inspection Service had launched an investigation. Cotter was charged later that year and by December 2020 had been hit with an injunction ordering him to stop “selling technical-support services or software via telemarketing or websites.”
The legal case dragged on for years, until Cotter finally pleaded guilty in January 2026 to one count of conspiracy to commit bank fraud. Last week, the 64-year-old Cotter was sentenced to 28 months in prison.
