FHB sues local car wash joint over fraudulent claims

First Hawaiian Bank has filed a civil lawsuit against Tianchi Corp., doing business as Jiuzhou Car Wash, over allegedly fraudulent claims made by the establishment’s customers, resulting in a bank’s loss of over $95,000.

FHB filed a breach of contract lawsuit last week against Tianchi Corp. and its operator, Hong Yong Fu, in the U.S. District Court for the NMI.

As relief, FHB is seeking judgment of $95,879.01, plus interest, costs of collection and attorneys’ fees.

According to the lawsuit, on or about Oct. 22, 2021, Tianchi submitted to FHB a merchant processing agreement application requesting that FHB provide merchant services, including the provision of a credit/debit card terminal for use by Tianchi at its car wash business on Saipan, Jiuzhou Car Wash.

Once approved, the intent of the application was that Tianchi could swipe customers’ credit/debit cards or insert credit/debit cards into the merchant terminal in order to charge the customers’ credit/debit card accounts for services provided or goods sold to the customers by Tianchi. FHB would then collect those charges from the issuer of the customer credit/debit cards. This created the merchant agreement between FHB and Tianchi.

Hong, the operator, guaranteed the obligations and performance of Tianchi under the agreement.

Pursuant to the agreement, FHB installed a merchant terminal at Tianchi’s business premises and Tianchi started utilizing the terminal to process customer’s credit cards and debit card transactions.

Starting around February 2023, FHB claims the number and amount of transactions processed through Tianchi’s merchant terminal increased. In addition, FHB began receiving notices of dispute initiated by the issuers of the credit/debit cards used by their cardholders at Tianchi’s place of business using Tianchi’s merchant terminal.

The notices of disputes alleged that the transactions were fraudulent and that the credit/debit cards in question were not or could not have been presented to Tianchi for services rendered or sales made by Tianchi to the cardholders.

To date, FHB says it has received notices of disputes in the aggregate amount of $117,549.04.

FHB said it has been able to recover certain of those funds but $95,879.01 remains outstanding.

As a consequence, FHB has been required to reverse the fraudulent transactions and reimburse the issuers of the credit/debit cards used in the fraudulent transactions.

FHB demanded that Tianchi and Hong, who guaranteed the obligations of Tianchi under the agreement, pay FHB the full amount of its losses resulting from the fraudulent transactions. Tianchi has allegedly failed and refused to do so.

“As a consequence, Tianchi is in breach of the agreement, Hong is in breach of his guaranty and FHB is entitled to an award of damages against Tianchi and Hong jointly and severally in the principal amount of $95,879.01, plus attorneys’ fees and costs in pursuing this action as provided for in the agreement,” said FHB.