Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DARCY WEDD was sentenced yesterday to 10 years in prison for his participation in a fraudulent 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.” The fraud committed by WEDD and his co-conspirators resulted in the theft of over $150 million from consumers throughout the United States. WEDD was convicted by a jury on December 15, 2017, following a two-week trial, and was sentenced yesterday in Manhattan federal court by the Honorable Katherine B. Forrest.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Darcy Wedd was convicted of engaging in a large-scale auto-subscribing scheme that forced mobile phone users to pay charges for unsolicited and unwanted text messaging services. The conduct of Wedd and his co-conspirators ultimately netted over $150 million in illegal profits. Today’s sentence reflects the seriousness of Wedd’s predatory consumer fraud.”
According to the Superseding Indictment filed in Manhattan federal court, the evidence presented at trial, and statements made in connection with WEDD’s sentencing:
WEDD was the chief operating officer, and eventually the chief executive officer, of Mobile Messenger, a U.S. aggregation company in the mobile phone industry. 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. Between 2011 and 2013, WEDD and others engaged in a massive scheme to defraud ordinary consumers by placing unauthorized charges for premium text messaging services on their cell phone bills, through a practice known as auto-subscribing.
The auto-subscribing scheme essentially involved two main players in the mobile phone industry: mobile aggregators, such as Mobile Messenger, and content providers, which sent consumers the unwanted text messages that ultimately resulted in them being billed for services they had not authorized. Mobile Messenger worked with four different content providers in the scheme, each of which was essential to the scheme’s success. WEDD participated in auto-subscribing through three of those content providers: Tatto, which was operated by co-conspirator Lin Miao, and CF Enterprises and DigiMobi, which were operated by co-conspirator Eugeni Tsvetnenko, a/k/a “Zhenya.”
In or about 2010, Miao, who was the CEO of Tatto, decided to begin auto-subscribing mobile phone users to Tatto’s premium text messaging services in order to boost Tatto’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, 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 made in connection with the scheme needed to go through Pajaczkowski. WEDD later received his portion of the payments from Miao through Pajaczkowski.
In or about early 2012, WEDD, Pajaczkowski, and two other co-conspirators, Erdolo Eromo and Fraser Thompson, who were also Mobile Messenger executives, had discussions about how to increase revenue at Mobile Messenger in the wake of the decreasing profitability of premium text messaging services. Tsvetnenko had been kicked off Mobile Messenger’s aggregation platform in the past due to suspicious subscribing practices, including past incidents of auto-subscribing. Nevertheless, in early 2012, WEDD, Pajaczkowski, Eromo, and Thompson agreed to allow Tsvetnenko to establish two new content providers, CF Enterprises and DigiMobi, to conduct a scheme to auto-subscribe on Mobile Messenger’s aggregation platform. WEDD, Pajaczkowski, Eromo, and Thompson also devised a method of receiving and distributing their cut of the proceeds from the auto-subscribing scheme through multiple layers of shell companies, in an effort to conceal the nature and purpose of the money.
The auto-subscription scheme, through all of the content providers that it involved, affected hundreds of thousands of consumers and generated over $150 million in proceeds, which the co-conspirators apportioned among themselves and used to fund lavish lifestyles of expensive vacations, luxury cars, and gambling. WEDD, moreover, personally received over $1.7 million in fraud proceeds as a result of his participation in the illegal scheme.
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In addition to the 10-year prison term, WEDD, 40, of New York, New York, was sentenced to three years of supervised release.
To date, eight defendants, Andrew Bachman, Miao, Pajaczkowski, Eromo, Jonathan Murad, Francis Assifuah, Jason Lee, and Christopher Goff have pled guilty in connection with their participation in the fraud. One additional defendant, Thompson, was convicted by a jury on September 5, 2017, following a three-week trial.
Mr. Berman praised the investigative work of the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sarah E. Paul, Richard Cooper, and Jennifer L. Beidel are in charge of the prosecution.
