Federal grand jury charges spam’s “poster boy” Alan M. Ralsky and ten others for international illegal spamming and stock fraud operation. Defendants’ pump-and-dump scheme earned them $3 million in 2005 alone.

A federal grand jury in Detroit recently returned a 41-count indictment against 11 persons – including a man described as one of the US’s most prolific senders of spam e-mail – over a fraud scheme that manipulated Chinese stock prices.

Charged for engaging in a wide-ranging international fraud scheme involving the illegal use of bulk commercial e-mailing, or "spamming," are: Alan M. Ralsky, 52, his son-in-law Scott K. Bradley, 46 and Judy Devenow, 55, of Michigan; John S. Bown, 47, William C. Neil, 45, Anki K. Neil, 36, James E. Fite, 34, and Francis A. Tribble of California; James E. Bragg, 39, of Arizona; Peter Severa, age unknown, of Russia; and How Wai John Hui, 49, a dual citizen of Canada and Hong Kong. While Scott Bradley, Judy Devenow and How Wai John Hui were arrested, the remaining defendants are still at large.

Agents from the Federal Bureau of Investigation, assisted by the U.S. Postal Inspection Service and the Internal Revenue Service, conducted a three-year investigation that revealed a sophisticated and extensive spamming operation. The indictment alleges that the defendants ran a stock “pump and dump” scheme, in which they sent spam promoting thinly traded Chinese penny stocks, drove up their stock price, and reaped profits by selling the stock at artificially inflated prices.

Illegal methods used to evade spam-blocking devices. The defendants allegedly employed, among others, falsified “headers” in the email messages, proxy computers to relay the spam, falsely registered domain names to send the spam, and misrepresentations in the advertising content of some of the email messages. As a result, recipients were tricked into opening, and acting on, the advertisements in the spam.

“Botnets” used to send spam. The indictment also alleges that the defendants utilized this cybercrime tool – a network of “robot” computers that have been infected with a malicious software code that instructs the infected computers to send spam. The defendants earned profits when recipients responded to the spam and purchased the touted products and services.

The Chinese connection. Hui’s primary role in the scheme was to act as a conduit for Chinese companies (publicly traded yet!) who wanted their stocks pumped by the scheme. Ultimately, investigators estimate that the defendants earned approximately $3 million during the summer of 2005 alone as a result of their illegal spamming activities.

Ralsky’s life of (cyber)crime cut short. Widely known for his legal battles involving spamming operations that tried to sell mortgages, stocks, diet pills and more, Alan Ralsky has been a target of anti-spam efforts for years. He was sued by Verizon in 2001 for shutting down its networks with millions of e-mail solicitations.

The 41-count indictment - reflecting the evolution of the illegal spammers’ business practices over the course of their operation – includes charges of conspiracy, fraud in connection with electronic mail (CAN SPAM), computer fraud, mail fraud, wire fraud, money laundering, criminal asset forfeiture, and making false statements to law enforcement.

According to Assistant Attorney General Alice S. Fisher of the Criminal Division, "The flood of illegal spam continues to wreak havoc on the online marketplace and has become a global criminal enterprise… This indictment reflects the commitment of the Department of Justice to prosecuting these spamming organizations wherever they may operate…"

U.S. Attorney Stephen J. Murphy added, "Today's charges seek to knock out one of the largest illegal spamming and fraud operations in the country, an international scheme to make money by manipulating stock prices through illegal spam e-mail promotions..."

Conviction on the most serious charges – mail fraud and wire fraud – carries a punishment of up to 20 years in prison and a $250,000 fine.