"Godfather of Spam" goes to prison for four year
Alan Ralsky, the so-called "Godfather of spam" was yesterday sentenced by a federal judge in Detroit to spend the next 51 months of his life in prison for wire fraud, mail fraud, and violations of the CAN-SPAM act.
Not content simply to move boxes of pills or to sign people up for new mortgages, Ralsky's operation instead pulled in millions of dollars through "pump and dump" schemes of thinly traded stocks in companies you've never heard of. Millions of e-mails would announce some hot new "Internet IPO!!!!!" just about to drop, and—amazingly—some people would want in on the action. Since the stocks in question were low-volume "pink sheets" stocks, even low levels of activity could boost the stock price, at which point the owners would sell and forward tens of thousands of dollars from Hong Kong to the Standard Federal Bank in Troy, Michigan.
This might not sound like a good way to get rich, but the government's court documents showed just how lucrative the practice could be. Consider the list of following payments that arrived from Hong Kong in just one month, July 2005:
- July 5: $180,826.61
- July 11: $211,595.76
- July 14: $13,532
- July 22: $780,295.98
- July 26: $65,590.71
- July 27: $424,963.73
- July 27: $23,702
A scheme like this required a certain amount of sophistication, and Ralsky appears to have run it like a real business. He was the chief executive, and his son-in-law, Scott Bradley, was the chief financial officer. John Bown, CEO of network administration company GDC Layer One, was the "chief technology officer and network systems manager" for the spammers. William Neil served as the chief operating officer and registered many of the hundreds of bogus domain names used by the group.
The conspiracy was global. Although Ralsky and Bradley both lived in West Bloomfield, Michigan, members of their team operated from New York, Brazil, California, Hong Kong, and Dayton, Ohio, and included coders, a stockbroker, a Chinese CEO, and network admins.
Ralsky has been at his tricks for years, and eventually acquired a reputation as one of the world's top spammers. Court documents show that when the spammers recruited someone who claimed he could get 20 million e-mails a day into AOL and Hotmail, the man was awestruck to find out that he was joining Ralsky's operation. "King of spam wants to rent me," he wrote in an instant message. "Cool." (The man eventually made several hundred thousand dollars from his work for Ralsky.)
The Spamhaus description of Ralsky says that "he has grown from a small time operator, under the 'Additional Benefits' moniker, to one of the bigger spam houses on the Internet with a gang of fellow morally challenged types working with him to pump out every type of sleazy deal and scam offer into millions of internet users' mailboxes."
Ralsky wasn't always careful. He would recruit coders from sites like "special ham" (spam) using the "amr777" handle, and his team tried to cloak its e-mail discussions about proxies by using the fairly transparent replacement "p's," "peas," "proximate," and "p s."
Ralsky and company earned more than $2.6 million between May 1 and December 1, 2005 alone, but the feds were closing in. A three-year investigation by the FBI, the US Postal Inspection Service, and the Internal Revenue Service (with a little help from the SEC) untangled the conspiracy. In 2007, the government moved to indict the entire conspiracy.
Yesterday, the lead defendants were finally sentenced after pleading guilty in June 2009. Ralsky and his son-in-law got 51 months and 40 months in jail, respectively, and had to forfeit the cash associated with the spamming scheme. They will be on probation after their release. How Wai John Hui, the Chinese/Canadian CEO who helped arrange the stocks for use in the scheme, also got 51 months. John Bown got 32 months for setting up a botnet used to send the e-mails. A handful of others will be sentenced today.
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