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Hundreds of Thousands Defrauded In $50 Million Text Messaging Scam
May 29, 2015
On May 28, 2015, the United States Attorney for the Southern District unsealed a criminal Complaint charging Defendants Lin Miao, Yong Jason Lee a/k/a "Jason Lee," Michael Pearse, Yongchao Liu a/k/a "Kevin Liu," Michael Pajaczkowski a/k/a "Paj," and Christopher Goff with count of conspiracy to commit wire fraud; and Miao Pajaczkowski, and Goff were additionally charged with one count of conspiracy to commit money laundering. The Complaint alleges that the Defendants charged hundreds of thousands of mobile phone customers over $50 million in monthly fees for unsolicited text messages during 2011 and 2013. The fraud was accomplished through "auto-subscribing," which is a scheme by which consumers were charged for premium text services for such content as horoscopes, celebrity gossip, and trivia.
NOTE: A criminal Complaint consists merely of allegations and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
As set forth in the Complaint:
- Miao and Lee worked for a company that offered premium text messaging services:
- Pearse and Liu worked for companies affiliated with Miao and Lee's texting company: and
- Pajaczkowski and Goff worked for a mobile aggregator that was the middleman between the texting company and various mobile phone carriers -- this middleman compiled the monthly charges for each texting customer and entered that data on the customers' bills.
As alleged in the Complaint, Pajaczkowski and Goff sold a large number of mobile phone numbers maintained by their aggregator to Miao and others. Miao then coordinated with Lee, Pearse, and Liu to have unsolicited text messaging services charged to the customers whose number were sold by Pajaczkowski and Goff.
In order to further the fraud, Miao, Lee, Pearse, and Liu undertook steps to give the appearance that the services had been duly purchased and authorized when, in fact, they had not. As a result, victims would typically be bill $9.99 a month for charges that appeared on their phone bills but as a result of industry convention, the disclosure were unclear and the means by which the charges were identified often hid the true nature of the underlying service. If the consumer failed to detect the monthly charges and unsubscribe from the unauthorized service, they would continue to get billed. Even if consumers complained to the texting company or its affiliates, such protest were often rebuffed. The Complaint acknowledges that steps were taken to conceal the cited activities from the aggregator.
The Complain further alleges that Miao, Pajaczkowski, and Goff laundered the proceeds of their crimes through the creation of shell companies that received payments.
If convicted, Defendants face up to 20 years in prison on each count.