NEW YORK (Reuters) - Six men have been criminally charged over an alleged “mobile cramming” scheme in which they bilked hundreds of thousands of mobile phone users out of more than $50 million by providing unwanted text messaging services, U.S. authorities said on Thursday.
U.S. Attorney Preet Bharara in Manhattan announced the charges nearly a year after the defendant Lin Miao and several corporate entities settled related civil charges with the U.S. Federal Trade Commission by surrendering more than $10 million of assets including a Beverly Hills, California home, Bentley and Mercedes vehicles, and Tiffany jewelry.
According to the complaint, the scheme ran from 2011 to 2013, and centered on a texting company that Miao owned and where the defendant Yong Jason Lee was chief technology officer.
The defendants allegedly provided messages about celebrity gossip, horoscopes, jokes, love tips and trivia to phone users, through a process called “auto-subscribing.”
Victims would be charged $9.99 a month even if they ignored or deleted the messages, and typically were unaware of the fraud until unintelligible items such as “96633IQ16CALL8668611606” began appearing on their phone bills, the complaint said.
Some proceeds would fund “a lavish lifestyle of expensive parties, travel, and gambling,” according to the complaint, which was signed by an Internal Revenue Service agent.
That agent quoted from a Nov. 2011 email to Miao from Lee about the collection of phone numbers, and which said: “Please don’t forget that I‘m your Secret Weapon. :) ... I‘m pretty sure you will be ended up [sic] around 1.6 Million valid phone numbers by end of this month. (Can you buy me a house? haha)”
Miao, Lee, Michael Pajaczkowski, Christopher Goff, Michael Pearse and Yongchao Liu were charged with conspiracy to commit wire fraud and mail fraud. Miao, Pajaczkowski and Goff were also charged with conspiracy to commit money laundering. Each count carries a maximum 20 years in prison.
“Stealing incrementally is stealing nonetheless, and if the allegations are proven, the defendants will have to answer for this massive consumer fraud,” Bharara said in a statement.
Miao was arrested on Wednesday. Lee, Pajaczkowski and Goff were arrested on Thursday. Pearse and Liu live in Australia and have not been arrested. The U.S.-based defendants were expected to make court appearances on Thursday.
Jeffrey Jensen, a lawyer for Pajaczkowski, declined to comment. Lawyers for the other defendants could not immediately be identified.
The case is U.S. v. Miao et al, U.S. District Court, Southern District of New York, No. 15-mag-01771.
Reporting by Jonathan Stempel in New York