Damian Williams, United States Attorney for the Southern District of New York, announced that MICHAEL PEARSE, an Australian national who was extradited to the United States from Australia in January 2021, was sentenced today to 109 months in prison for his participation in a fraudulent scheme to charge hundreds of thousands of mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent – a practice the conspirators referred to as “auto-subscribing.” PEARSE played a key role in the scheme as CEO of a company that created the computer program that was used to enroll victims into the text message services without their knowledge or consent. PEARSE previously pled guilty before United States District Judge Analisa Torres, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Michael Pearse played a vital role in an international consumer fraud conspiracy that swindled hundreds of thousands of mobile phone customers out of millions, and ‘earned’ Pearse and his co-conspirators at least $50 million, of which Pearse pocketed more than $10 million. Thanks to IRS Criminal Investigation and the FBI, as well as our international partners, Pearse was apprehended, prosecuted, and now sentenced for his crime.”
According to the allegations contained in the Indictment, evidence presented at the trial of co-conspirator Darcy Wedd, court filings, and statements made during plea proceedings:
From in or about 2011 through in or about 2013, PEARSE and his co-conspirators engaged in a multimillion-dollar scheme to defraud U.S.-based consumers (and others) by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills. To carry out the scheme, PEARSE and others caused unsolicited and recurring text messages to be sent to mobile phone users containing content such as horoscopes, celebrity gossip, or trivia facts. The victims of the fraud scheme never ordered these services, which were known in the industry as premium text messaging (“PSMS”) services, but were fraudulently “auto-subscribed” and billed for them at a rate of $9.99 per month. The $9.99 charge recurred each month unless and until consumers noticed the charges and took action to unsubscribe. Even then, consumers’ attempts to dispute the charges and obtain refunds were often unsuccessful.
During the relevant period, co-conspirator Lin Miao operated a company called Tatto Inc., a/k/a “Tatto Media” (“Tatto”), that offered PSMS services to mobile phone customers. PEARSE was the CEO of a company called Bullroarer, which was affiliated with Tatto. To enable Tatto to auto-subscribe consumers to unwanted PSMS services, PEARSE and co-defendant Yongchao Liu, a/k/a “Kevin Liu,” who worked as a Java Development Engineer for Bullroarer, agreed to build a computer program that could spoof the required consumer authorizations – i.e., a program that could generate the text message correspondence that one would ordinarily see with genuine PSMS subscriptions. PEARSE and Liu agreed to build the program (the “Auto-Subscription Platform”), which was operational by in or about the middle of 2011. PEARSE, Liu, and Miao then used the Auto-Subscription Platform to fraudulently auto-subscribe hundreds of thousands of mobile phone customers, using phone numbers provided by co-conspirators at Mobile Messenger, a U.S. aggregation company operated by Darcy Wedd that served as a middleman between content providers such as Tatto and mobile phone carriers. Through their successful orchestration of the fraudulent scheme, PEARSE and his co-conspirators generated more than $50 million in fraud proceeds for themselves and PEARSE personally pocketed more than $10 million.
In addition to the prison sentence, PEARSE was ordered PEARSE to forfeit $10,162,937.96, as well as his interest in three real properties in Australia and other assets, representing proceeds traceable to the fraud that PEARSE personally obtained.
To date, nine other defendants – Liu, Miao, Andrew Bachman, Michael Pajaczkowski, Erdolo Eromo, Jonathan Murad, Francis Assifuah, Jason Lee, and Christopher Goff – have pled guilty in connection with their participation in the fraud. Two additional defendants, Darcy Wedd and Fraser Thompson, were convicted in 2017 following jury trials.
Mr. Williams praised the outstanding investigative work of the Internal Revenue Service, Criminal Investigation, and the Federal Bureau of Investigation. In addition, Mr. Williams thanked law enforcement partners in Australia, as well as the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, for their support and assistance with the extradition of PEARSE and codefendant Liu.
