I found this while doing some research:
Setup and Blackmail. true story on BK7
The trustee and attorney who admitted this is taking place in Judge Manuel Barbosa's court, used this term because in some cases the people are intentionally setup so it appears they are committing fraud. To arrange for the people to "settle" gives the impression that they are guilty, and redeeming themselves. It relieves the trustees from being accused of extortion.
The illegal setup can also be described as a confidence crime. Members of the organized extortion ring in the U.S.