Prosecutors alleged that Mr. Severa received hundreds of thousands of dollars to issue spam for 12 stocks, with the symbols PGCN, CWTD, CDGT, SWIS, VAIG, WWBP, MWIS, CGKY, MIDX, CHMS, PPKI and AXCP.
China World Trade's Hui pleads guilty
2009-01-26 15:03 ET - Street Wire
by Mike Caswell
Vancouver promoter How Wai John Hui has pled guilty in Detroit to criminal fraud charges that stemmed from a 2005 stock spam scheme. He and others allegedly made $3-million spamming several thinly traded Chinese penny stocks. (All figures are in U.S. dollars.) In a plea agreement dated Dec. 16, 2008, Mr. Hui admits that he and prolific spammer Alan Ralsky caused tens of millions of spam e-mails to be sent touting four stocks, including China World Trade Corp., which purported to operate business clubs in China.
He says they used a technique called proxy mailing to hide the source of the spams, and they inserted false header information to further disguise the sender. Mr. Hui admits that he made money from selling the spam stocks (his plea agreement does not say how much), and that he paid $211,596 to have the spam sent. In pleading guilty, Mr. Hui has agreed to forfeit his interest in $500,000 that prosecutors say is the proceeds of crime. He must also pay a fine of up to $1-million, with the exact amount to be determined by the judge. The conditions of his release include three years of supervision.
Mr. Hui had faced up to 20 years in jail, but with his guilty plea, prosecutors have agreed to recommend that his sentence be 63 to 78 months. It may be further reduced to between 32 and 39 months if he provides useful testimony against others. His plea agreement does not specifically mention if he will testify against Mr. Ralsky, who is one of his co-defendants, but it does say that he must "provide truthful testimony at all proceedings, criminal, civil, or administrative, as requested by the ... U.S. Department of Justice." Until his sentencing, which is set for Oct. 22, 2009, Mr. Hui is allowed to travel freely in the United States. He had previously been confined to a home in the Detroit area and had to wear an ankle bracelet with a GPS. He will not be permitted to return to Vancouver or Hong Kong, where he alternately resides.
The indictment
Prosecutors unsealed a 41-count indictment against Mr. Hui and 10 others on Jan. 3, 2008, the day after police arrested Mr. Hui at a New York airport. The other defendants were Alan M. Ralsky, 62, of Michigan; Scott K. Bradley, 46, of Michigan; Judy M. Devenow, 55, of Michigan; John S. Bown, 47, of California; William C. Neil, 45, of California; Anki K. Neil, 36, of California; James E. Bragg, 39, of Arizona; James Fite, 34, of California; Peter Severa, of Russia; and Francis A. Tribble, of California.
The indictment alleged that Mr. Hui bought large blocks of stock in several Chinese companies, which he had deposited at New York brokerage Gilford Securities Inc. He then hired Mr. Tribble to promote the companies, who in turn hired Mr. Ralsky and Mr. Bradley to spam the stocks. "The object of the unlawful spam e-mail conspiracy was personal financial gain [from] proceeds from the sale of stocks whose prices were inflated as a result of being advertised and promoted through false and fraudulent pretenses, promises and representations," the indictment read.
Much of the indictment dealt with the mechanics of the spam, which involved setting up a "botnet," or a network of computers that the spammers took control of through malicious software. The owners of the computers did not know that their computers were infected or that they were sending unsolicited e-mails. This made it difficult for investigators to trace the original source of the spam.
According to the indictment, Mr. Bradley also hired Mr. Severa, a Russian spammer who said he could get 20 million e-mails per day into AOL and Microsoft's Hotmail. When Mr. Severa learned that he would be working for Mr. Ralsky he replied: "King of Spam want to rent me. Cool." Prosecutors alleged that Mr. Severa received hundreds of thousands of dollars to issue spam for 12 stocks, with the symbols PGCN, CWTD, CDGT, SWIS, VAIG, WWBP, MWIS, CGKY, MIDX, CHMS, PPKI and AXCP.
It was not clear from the indictment who profited the most from the spam. Prosecutors listed a series of wire transfers from Hong Kong to Michigan, which totalled $2.6-million, as the proceeds of unlawful activity, but did not say who the money belonged to. They sought forfeiture of nine bank accounts, one life insurance policy and 12 brokerage accounts, many in the names of Mr. Ralsky and Mr. Bradley. They also sought the forfeiture of Mr. Ralsky's home in West Bloomfield, Mich., at 4747 Minnow Pond Dr. (In December, 2002, the on-line publication Slashdot published Mr. Ralsky's address alongside an article stating that he was one of the world's most prolific spammers. Afterward, people signed him up for hundreds of free catalogues and other non-electronic junk mail. The Detroit Free Press quoted him as saying: "They've signed me up for every advertising campaign and mailing list there is ... These people are out of their minds. They're harassing me.")
Mr. Ralsky has pled not guilty to the charges. He and the other defendants are scheduled to be tried by jury, beginning on Sept. 9, 2009.
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