Mobile Phone Industry Exec Sentenced- Role In Multimillion-Dollar Consumer Fraud Scheme

https://www.justice.gov/usao-sdny/pr/mobile-phone-industry-executive-sentenced-manhattan-federal-court-5-years-prison-role

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Friday, January 12, 2018

Mobile Phone Industry Executive Sentenced In Manhattan Federal Court To 5 Years In Prison For Role In Multimillion-Dollar Consumer Fraud Scheme

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FRASER THOMPSON was sentenced today to five 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 THOMPSON and his co-conspirators resulted in the theft of over $100 million from consumers throughout the United States. THOMPSON was convicted by a jury on September 5, 2017, following a three-week trial, and was sentenced today in Manhattan federal court by the Honorable Katherine B. Forrest.
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THOMPSON was the Senior Vice President of Strategic Operations at Mobile Messenger, a mobile aggregation company. 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, THOMPSON 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 cell 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 were essential to the scheme’s success. THOMPSON participated in auto-subscribing through two of those content providers, CF Enterprises and DigiMobi, which were operated by one of THOMPSON’s co-conspirators, Eugeni Tsvetnenko, a/k/a “Zhenya.”

The plan to auto-subscribe with Tsvetnenko came about in early 2012, in connection with discussions between THOMPSON and three other Mobile Messenger executives, co-conspirators Darcy Wedd, Erdolo Eromo, and Michael Pajaczkowki, a/k/a “Paj,” 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, THOMPSON, Wedd, Eromo, and Pajaczkowski 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.

THOMPSON, Wedd, Eromo, and Pajaczkowski agreed to a revenue split with Tsvetnenko, pursuant to which Tsvetnenko would keep approximately 70% of the auto-subscribing proceeds generated by CF Enterprises and DigiMobi, and the remaining 30% of the auto-subscribing proceeds would be divided evenly among THOMPSON, Wedd, Eromo, and Pajaczkowski. THOMPSON, Wedd, Eromo, and Pajaczkowski also devised a method of receiving and distributing the auto-subscribing money through multiple layers of shell companies, in an effort to conceal the nature and purpose of the money. These auto-subscribing activities with Tsvetnenko, which began in approximately April of 2012, and continued into 2013, resulted in hundreds of thousands of mobile phone users being auto-subscribed through Mobile Messenger. THOMPSON, moreover, personally received over $1.5 million in fraud proceeds as a result of his participation in the illegal scheme.
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