Feds Crack Down on Massive Text Message Consumer Fraud Scheme

September 17, 2015

text-messageThis week, the United States Attorney for the Southern District of New York, in collaboration with the Internal Revenue Service and Federal Bureau of Investigation, announced several arrests of executives at mobile aggregation companies and mobile content providers. The arrests follow a federal investigation of the individuals’ participation in a scheme that charged mobile phone users monthly fees for recurring unsolicited text messages, without the customers’ knowledge or prior express consent.

What was the nature of the alleged scheme?

The U.S. Attorney alleges that the arrested individuals “auto-subscribed” mobile phone users through the use of a computer program which spoofed the required consumer authorizations for the subject premium text messaging services. The computer program thus forced mobile phone users to pay charges for unsolicited text messaging services, such as horoscopes and celebrity gossip, for which they had not otherwise signed up.  The phone numbers were obtained from mobile aggregators by a content-provider, in exchange for large payments, for the purpose of using the computer program to auto-subscribe those phone numbers to the text message services. The content providers then verified that the numbers were valid, active, and did not belong to executives at phone carriers or people at mobile industry compliance groups who would likely initiate an audit had they noticed that their numbers had been auto-subscribed to a premium text messaging service for which they had not actually signed up.

The arrested individuals have each been charged with conspiracy to commit mail and wire fraud, conspiracy to commit money laundering, as well as a charge of wire fraud, with a maximum term of 20 years for each count.

How to Avoid Text Message Related Liability

This case is emblematic of a larger federal crackdown on commercial text message cramming, of which we have previously written, and should serve as a cautionary tale. The best way to avoid confrontation with federal regulators is to remain off of their radar in the first place. As such, it is critical to work closely with knowledgeable counsel, well-versed in the intricacies of the Telephone Consumer Protection Act, the FTC Act, and mobile marketing law.   The ability to demonstrate that you have worked closely with counsel to develop and implement practices designed to prevent the sending of unsolicited text messages can go a long way toward reducing exposure and damages in the event that you ultimately find your business served with a text message lawsuit.

If you are interested in learning more about this topic or need to review your billing and/or mobile marketing practices and procedures, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Similar blog posts related to this topic:

FTC Issues Recommendations to Thwart Mobile Cramming

FCC Creates TCPA Exemption for One-Time On-Demand Text Messages

Alleged Text Message Spammer Settles with FTC



David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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