NEW YORK (Reuters) - A U.S. judge threw out a central claim in a Federal Trade Commission lawsuit accusing Walmart of turning a blind eye to scam artists who used its money transfer services to fleece consumers out of hundreds of millions of dollars.

In a decision on Wednesday, U.S. District Judge Manish Shah in Chicago rejected a claim that Walmart owes monetary damages for violating the federal Telemarketing Sales Rule.

The rule prohibits deceptive and unfair acts in telemarketing, and bans money transfers to pay for goods and services offered through telemarketing.

Shah said the FTC didn't offer enough specifics on how the world's largest retailer and its allegedly ill-trained employees saw or consciously ignored warning signs that fraudsters used its money transfer services to break the law.

The judge had dismissed the Telemarketing Sales Rule claim in March 2023, leading the FTC to amend its complaint with new details. Wednesday's dismissal was with prejudice, meaning the FTC cannot pursue the claim again.

Shah said the regulator can still seek an injunction to against violations of an FTC Act provision that prohibits "unfair methods of competition in commerce."

The FTC declined to comment on Friday.

Walmart, based in Bentonville, Arkansas, welcomed the decision.

"We've said all along that the FTC's case is a misguided attempt to expand its enforcement authority, and [the] ruling validates that view," it said in a statement. "Walmart will continue working hard to keep consumers safe from scammers."

Walmart acts as an agent for money transfers by companies such as MoneyGram, Ria and Western Union. Money can be hard to trace once delivered.

The FTC said fraudsters used many common schemes, including impersonating Internal Revenue Service agents, impersonating family members who needed money from grandparents or other relatives to avoid jail, and telling victims they won lotteries or sweepstakes but owed fees to collect their winnings.

The case is Federal Trade Commission v Walmart Inc, U.S. District Court, Northern District of Illinois, No. 22-03372.

(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)

By Jonathan Stempel