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Clever cyber criminals scam iTunes for “Madonna-level” royalties

Originally published in the Los Angeles Daily Journal in April, 2012

By Nickolas Solish

 

In an era when most cyber-criminals are ordinary people accused of violating copyright through illegal downloading, an Internet-savvy group has found a novel way to defraud the online music world.  A group of twelve criminals worked out a unique scheme to defraud major music sellers through an elaborately devised method of laundering money.

The hooligans took advantage of online music vendors, iTunes and Amazon, by putting their own music up for sale and then using stolen credit cards to purchase it, receiving payments in royalties.

The gang of 12 was led by 24 year-old Craig Anderson, who organized the scheme and purchased two-dozen laptops to carry it out.  Anderson recruited the rest of his “team” to purchase the music using stolen credit card numbers.  In an attempt to avoid unwanted attention, each purchase was under £10 and the IP address of each computer was masked using a website called Hide My IP.

During 2008 and 2009, the group brought in £500,000 in royalty payments from the illegal purchases. The tip-off for iTunes was when they realized just how much in royalties they were paying to “DJ Denver,” a small, unheard of musician from Wolverhampton, England. The frequency and amount of royalty payments matched what iTunes pays to artists like Madonna.

Authorities noticed that DJ Denver was selling so well he was charting on high-volume download sales charts.

The scheme cost iTunes and Amazon between £750,000 and £1 million, according to English prosecutors. Interestingly, the thieves’ attempt to use the Hide My IP website backfired, as it failed to mask their computers’ specific IP addresses. The police were able to trace the purchases back to the computers and link them with Paypal addresses, which lead them to the gang.

Once the scheme was discovered, royalty payments were withheld, at which point a “Daniel Thompson” called Tunecore demanding payment of the outstanding royalties. Unbeknownst to him, Tunecore was aware of the fraud and persuaded him that the only way he could get his royalties was if he flew to New York to pick them up.

Tunecore offered to send him free plane tickets, at which point he gave he real name and address. From there, the police were able to uncover the entire scheme, netting twelve people total involved.

Ringleader Anderson was given a four year and eight month prison sentence. The musician who provided the songs was one James Batchelor, who pled guilty to conspiracy to defraud and received a two-year sentence. Other members of the group were given suspended sentences and ordered to do community service.

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