CEO of Mobile Aggregation Company Participated in Scheme to Bill Consumers for Fraudulent Text-Messaging Charges
Joon H. Kim, the United States Attorney for the Southern District of New York, announced today that DARCY WEDD, the CEO of a U.S. mobile aggregation company called Mobile Messenger, was convicted after a two-week jury trial on eight counts for his participation in a scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent – a practice known as “auto-subscribing.”
Acting Manhattan U.S. Attorney Joon H. Kim said: “As a Manhattan jury has unanimously found today, Darcy Wedd engaged in a scheme known as ‘auto-subscribing,’ forcing mobile phone users to pay charges for unsolicited and unwanted text messaging services, including horoscopes and celebrity gossip. The conduct of Wedd and his co-conspirators ultimately netted over a hundred million dollars in illegal profits. Thanks to the diligence of the IRS and FBI, the message is clear: perpetrators of consumer fraud schemes beware, federal investigators and prosecutors will protect everyday consumers and look to hold you accountable for your criminal fraud.”
According to the allegations contained in the Superseding Indictment and evidence presented at trial, from in or about 2011, through in or about 2013, WEDD and other co-conspirators engaged in a multimillion-dollar scheme to defraud consumers by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills, without the consumers’ knowledge or consent, through a practice known as “auto-subscribing.”
WEDD was the Chief Operating Officer, and eventually the Chief Executive Officer, of Mobile Messenger. In the relevant time period, mobile aggregators like Mobile Messenger compiled, or “aggregated,” charges for premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – on consumers’ mobile phone bills.
In or about 2010, Lin Miao, one of WEDD’s co-conspirators, who was the CEO of another company in the cellphone industry that provided premium text messaging content (the “Content Provider”), decided to begin auto-subscribing mobile phone users to the Content Provider’s premium text messaging services in order to boost the Content Provider’s sagging revenues. Miao and others built a computer program that could spoof the required consumer authorizations for premium text messaging services – i.e., a program that could generate the text message correspondence that one would ordinarily see if a consumer was genuinely signing up to receive the services (the “Auto-Subscription Platform”), which was operational by in or about the middle of 2011.
In or about October 2011, Miao met with WEDD and told him, in sum and substance, that MIAO wanted to auto-subscribe consumers through Mobile Messenger’s billing platform and needed phone numbers to do so. WEDD agreed to assist Miao. WEDD further told Miao, in sum and substance, that co-conspirator Michael Pajaczkowski, who was the Vice President of Compliance and Consumer Protection at Mobile Messenger, would provide phone numbers and assistance to Miao and that all payments needed to go through Pajaczkowski. WEDD later received his portion of the payments from Miao via Pajaczkowski.
Also in or about early 2012, WEDD, Pajaczkowski, and two other co-conspirators, Erdolo Eromo and Fraser Thompson, had discussions about how to increase revenues at Mobile Messenger, which were flagging because premium text messaging services had become less profitable. Among other things, WEDD, Pajaczkowski, Eromo, and Thompson agreed to allow co-conspirator Eugeni Tsvetnenko, who operated a content provider in Australia (“the Australian Content Provider”), to begin auto-subscribing consumers through Mobile Messenger. By at least in or about April 2012, Tsvetnenko had started auto-subscribing consumers. Over the course of the next several months through in or about mid-2013, Tsvetnenko and the Australian Content Provider auto-subscribed hundreds of thousands of phone numbers through Mobile Messenger and generated millions of dollars of revenue, which Tsvetnenko shared with WEDD, Pajaczkowski, Eromo, and Thompson.
The auto-subscription scheme affected hundreds of thousands of consumers and generated over $100 million dollars in proceeds, which the defendants apportioned among themselves and used to fund lavish lifestyles of expensive vacations, luxury cars, and gambling.
WEDD, 40, was convicted of two counts of conspiracy to commit wire fraud, two counts of wire fraud, and two counts of conspiracy to commit money laundering, each of which carries a maximum term of 20 years in prison. WEDD was also convicted of two counts of aggravated identity theft, each of which carries a minimum term of two years in prison. WEDD was remanded into custody following the verdict and is scheduled to be sentenced on April 2, 2018, before Judge Katherine B. Forrest.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
To date, six additional defendants, Andrew Bachman, Miao, Pajackowski, Jonathan Murad, Francis Assifuah, and Eromo have pled guilty in connection with their participation in the fraud, and one additional defendant, Thompson, was convicted by a jury on September 5, 2017, following a three-week trial.
Assifuah was sentenced to 33 months in prison. Thompson is scheduled to be sentenced on January 12, 2018. Sentencing dates have not been set for Bachman, Miao, Pajackowski, Murad, or Eromo.
Mr. Kim praised the investigative work of the IRS-CI and the FBI, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.
No comments:
Post a Comment