Leader Of Miami Crew Sentenced To 63 Months In Prison For Defrauding Banks And Cryptocurrency Exchange Of More Than $4 Million
Audrey Strauss, the United States Attorney for the Southern District of New York, Ramsey E. Covington, the Acting Special Agent-in-Charge of the Boston Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today 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. PEARSE and LIU will be presented and arraigned today before U.S. Magistrate Judge Debra Freeman. The case has been assigned to U.S. District Judge Analisa Torres.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Michael Pearse and Yongchao Liu played key roles in an international consumer fraud conspiracy that victimized hundreds of thousands of mobile phone customers to the tune of more than $50 million. Thanks to IRS Criminal Investigation and the FBI, as well as our international partners, Pearse and Liu are now in the United States and facing serious charges in this District.”
IRS-CI Acting Special Agent in Charge Ramsey E. Covington said: “Through a sophisticated text messaging scam, the defendants and their co-conspirators allegedly swindled more than $50 million in proceeds from hundreds of thousands of unwitting mobile customers. Yesterday’s extraditions continue the pathway to justice for the staggering number of victims and financial losses accumulated as a result of this alleged scheme. I applaud the collective efforts of the law enforcement agencies whose collaboration and coordination made the extraditions possible.”
FBI Assistant Director William F. Sweeney Jr. said: “Pearse and Liu will finally face the consequences for the text messaging scheme they were charged with more than five years ago. Their extradition is a reminder that being out of our sight and out of our reach are two different things.”
According to allegations in the Indictment, evidence presented at the trial of co-conspirator Darcy Wedd, and other public filings:
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, 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, 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, LIU, and their co-conspirators generated more than $50 million in fraud proceeds for themselves.
* * *
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.
Ms. Strauss praised the outstanding investigative work of IRS-CI and the FBI. In addition, Ms. Strauss thanked law enforcement partners in Australia, particularly the International Crime Cooperation Central Authority, Australian Federal Police, and the New South Wales Police Force, as well as the U.S. Department of Justice’s Office of International Affairs, for their support and assistance with the defendants’ extraditions.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jilan Kamal and Olga Zverovich are in charge of the prosecution.
The charges in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment and charges set forth herein constitute only allegations, and every fact described should be treated as an allegation.
James Margolin, Nicholas Biase