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'Spam King' and Cohorts Plead Guilty to Fraud and Other Charges
The National Law Journal
June 24, 2009
image: getty images/photodisc green
America's so-called spam king and his cohorts are going to prison.
Alan Ralsky, whom federal prosecutors called one of the world's most notorious spammers, and four co-defendants pleaded guilty on Monday in federal court in Detroit for their roles in an international spamming scheme that sent billions of illegal e-mail advertisements to pump up Chinese "penny" stocks. The defendants then reaped profits by causing trades in these same stocks while others bought at the inflated prices, prosecutors alleged.
All five defendants will be sentenced on Oct. 29.
Ralsky, 64, of West Bloomfield, Mich., who served as the chief executive officer and primary deal maker for the spam operation, pleaded guilty to a variety of charges, including wire fraud, money laundering and violating the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act), which prohibits the falsification of certain information used in the transmission of e-mail. He faces up to 87 months in prison and a $1 million fine.
"He, like anyone else, is always relieved to put something like this behind him, although of course he still faces sentencing," said Ralsky's lawyer, Steven Fishman, a criminal defense solo practitioner in Detroit.
Fishman said that Ralsky's sentencing guidelines are 75 to 87 months. "But -- and this is a big but -- he has cooperated fully with the government, and as such, the government will recommend a guideline of 35 to 43 months. That's all in the plea agreement," Fishman said.
Fishman, meanwhile, remains skeptical about the harm his client actually caused and questioned the purpose of the law he was prosecuted under -- namely the CAN-SPAM Act.
"If you're asking me, 'Was it a wise piece of legislation?,' I would rank it right next to prohibition," Fishman said. "The law is the law. But I doubt that there are too many people who leave their homes petrified that their e-mail will be flooded with spam."
Federal prosecutors see things differently.
"Using the Internet to manipulate the stock market through spam e-mail campaigns is a serious crime, and this case serves notice that federal law enforcement has the both the capability and the will to successfully investigate, prosecute and punish such cybercrimes," said Terrence Berg, the U.S. attorney for the Eastern District of Michigan, in a statement.
The prosecution is the U.S. Department of Justice's largest to date under the 2003 CAN-SPAM Act.
According to court records, from January 2004 through September 2005, Ralsky and several others conspired to use spam e-mails to manipulate thinly traded stocks and profit by trading in those stocks once their share prices increased after recipients of the spam e-mails traded in the stocks being promoted. The defendants were indicted in December 2007 after a three-year investigation that involved the FBI, the U.S. Postal Inspection Service and the Internal Revenue Service.
According to the indictment, the conspirators used wire communications, the U.S. mail and common carriers to further their frauds. They also engaged in money laundering involving millions of dollars generated by their manipulative stock trading.
They used various illegal methods in order to maximize the amount of spam that evaded spam-blocking devices and tricked recipients into opening, and acting on, the advertisements in the spam.
"Cybercrime investigations are a top priority of the FBI, and we will continue to aggressively investigate those individuals who use and hide behind computers to commit various crimes," said Andrew G. Arena, the FBI special agent in charge.
The other defendants were:
• Ralsky's son-in-law, Scott K. Bradley, 38, who served as the chief financial officer and director of operations for the spam e-mail operation. He faces up to 78 months in prison and a $1 million fine.
• John S. Bown, 45, of Fresno, Calif., who pleaded guilty to conspiracy to commit wire fraud and mail fraud and to violate the CAN-SPAM Act. He created a botnet, which is a network of computers that have been infected by malicious software. He faces up to 63 months in prison and a $75,000 fine.
• William C. Neil, 46, of Fresno, Calif. who pleaded guilty to conspiring to to violate the CAN-SPAM Act and violating the CAN-SPAM Act. He faces up to 37 months in prison and a $30,000 fine.
• James E. Fite, 36, of Culver City, Calif., who pleaded guilty to conspiracy to commit wire fraud and mail fraud and to violate the CAN-SPAM Act. He also pleaded guilty to violating the CAN-SPAM Act and making false statements to FBI agents. He faces up to two years in prison and a $30,000 fine.
