Federal officials in New York today announced that Michael Pearse, an Australian national, and Yongchao Liu, a/k/a “Kevin Liu,” a Chinese national, were extradited from Australia and arrived in the United States yesterday. Pearse and Liu were extradited on charges of conspiracy to commit wire fraud, wire fraud, aggravated identity theft, and, as to Pearse, conspiracy to commit money laundering, stemming from the defendants’ participation in a scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages about topics such as horoscopes, celebrity gossip, and trivia facts, without the customers’ knowledge or consent – a practice that the defendants and their co-conspirators referred to as “auto-subscribing.” The portion of the fraudulent scheme that Pearse, Liu, and their co-conspirators orchestrated generated more than $50 million in proceeds for themselves.
According to allegations in the indictment:
From in or about 2011 through in or about 2013, Pearse, Liu, and their 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, through a practice known as auto-subscribing.
During the relevant time period, Lin Miao, a co-conspirator of Pearse and Liu, operated a company called Tatto, which offered premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – to mobile phone customers. Pearse and Liu worked for a company called Bullroarer, which was affiliated with Tatto. Pearse was the CEO of Bullroarer and Liu was a Java development engineer for Bullroarer. Co-conspirator Darcy Wedd operated Mobile Messenger, a U.S. aggregation company in the mobile phone industry that served as a middleman between content providers such as Tatto and mobile phone carriers, and was responsible for assembling monthly charges incurred by a particular mobile phone customer for premium text messaging services and placing those charges on that customer’s cellular phone bill.
To carry out the scheme, co-conspirators at Tatto purchased large numbers of mobile phone numbers from co-conspirators at Mobile Messenger, who had access to those numbers by virtue of their employment. Pearse and Liu and their co-conspirators then worked to have unsolicited text messages sent to these and other mobile phone numbers and to enroll those customers in premium text messaging services without their knowledge or consent. Pearse and Liu and their co-conspirators also took steps to conceal the fraud scheme by making it appear as if the customers had, in fact, elected to purchase the text messaging services, when in truth they had not.
The consumers who received the unsolicited text messages typically ignored or deleted the messages, often believing them to be spam. Regardless, the consumers were billed for the receipt of the messages, at a rate of $9.99 per month, through charges that typically appeared on the consumers’ cellular telephone bills in an abbreviated and confusing form, e.g., with billing descriptors such as “96633IQ16CALL8668611606” and “25184USBFIQMIG.” 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 from Tatto, Bullroarer, or other corporate affiliates of Tatto were often unsuccessful.
After obtaining proceeds of the fraud scheme, Pearse worked with other co-conspirators to launder the proceeds. Pearse and his co-conspirators distributed the proceeds of the fraud scheme among themselves and others involved in the scheme by, among other things, causing funds to be transferred through the bank accounts of a series of shell companies and companies held in the names of third parties. This was done in order to conceal the nature and source of the payments and Pearse’s and his co-conspirators’ participation in the fraud.
Through their successful orchestration of this fraud scheme, which affected hundreds of thousands of consumers, Pearse and Liu and their co-conspirators generated more than $50 million in fraud proceeds for themselves.
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Pearse, 52, and Liu, 33, are each charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. §§ 1343 and 1349, which carries a maximum penalty of 20 years in prison; one count of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2, which also carries a maximum penalty of 20 years in prison; and one count of aggravated identity theft, in violation of 18 U.S.C. §§ 1028A and 2, which carries a mandatory sentence of two years in prison, consecutive to any other sentence imposed. In addition, PEARSE is charged with one count of conspiracy to commit money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(B)(i), 1957, and 1956(h), which carries a maximum sentence of 20 years in prison. 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.
