"Spam King" Ralsky Pleads Guilty To Stock Fraud Scheme

Ralsky, 64, of West Bloom field, Mich., pleaded guilty Monday in a Detroit federal court, along with four accomplices, for e-mail fraud that violated the CAN SPAM Act, as well as numerous counts of computer fraud, mail fraud, wire fraud and other money laundering charges, according to the U.S. Department of Justice. Altogether, the spam scheme netted Ralsky and his criminal team an estimated $3 million between January 2004 and September 2005.

Specifically Ralsky was brought up on numerous charges related to running an illegal international spamming operation that sold phony "pump and dump" stocks. The elaborate scheme entailed widespread spam blasts that enticed users by telling them that prices for thinly traded Chinese penny stocks were about to soar. Many of the spam e-mails promoted "pink sheet" stocks for U.S. companies owned and controlled by individuals in Hong Kong and China. The transaction subsequently drove up the costs of the stock and Ralsky and his accomplices reaped in profits by selling the stocks at artificially inflated prices.

The group propelled the pump and dump stock scheme through various malware and phishing tool kits designed to maximize the amount of e-mail messages sent and circumvent spam filters. The spam e-mails convinced victims to open, and act on, the advertisements contained in the message by using false "headers" in e-mail messages, deploying proxy computers to relay spam, using falsely registered domain names to send the spam that obfuscated the message's origins, and misrepresenting the advertising content of the e-mail messages, according to the indictment.

"We will not allow criminals to use e-mail as a conduit for fraud. This prosecution, the Department's largest to date under the CAN-SPAM Act, underscores our strong and steadfat commitment to ridding our financial markets and cyberspace of e-fraudsters looking to prey on innocent victims," said Assistant Attorney General Lanny Breuer, in a statement.

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Ralsky's son-in-law Scott Bradley, 38, also of West Bloomfield, served as the chief financial officer and director of operations for the spam ring. Both Ralsky and Bradley, who spearheaded the operation, face up to seven years and six and a half years respectively in prison, and will be required to pay up to $1 million in fines, according to the plea bargain agreement.

John Bown, 45, of Fresno, Calif. pleaded guilty to conspiracy to commit wire fraud, mail fraud and violating the CAN-SPAM Act, as well as conspiring to commit computer fraud by creating a botnet. Bown, a former chief executive for ISP, GDC Layer One, served as the organization's chief technology officer and faces more than five years in prison as well as a $75,000 fine.

Also pleading guilty were William Neil, 46, of Fresno and James Fite, of Culver City, Calif. who face three and two years in prison respectively and who each face a $30,000 fine for violating the CAN-SPAM Act, as well as other fraud charges.

The charges and resulting plea bargain followed after a three-year FBI investigation into the organization's fraudulent activities. All five defendants are scheduled to be sentenced Oct. 29.

U.S. Attorney Terrence Berg, indicated in a statement that the DOJ had the wherewithal to continue to pursue and prosecute members of cybercrime operations that committed fraud and other types of illegal acts over the Internet.

"Using the Internet to manipulate the stock market through spam email campaigns is a serious crime and this case serves notice that federal law enforcement has both the capability and the will to successfully investigate, prosecute and punish such cybercrimes."