According to a press release from the FBI and U.S. Attorney James Jacks of the Northern District of Texas, 19 defendants are each charged with one count of conspiracy to commit wire and mail fraud. The indictments are an extension of charges that were pressed last spring, when nine of the defendants of a hosting company called Core IP were raided by the FBI.
The indictment of the 19 defendants paints a picture of a complex series of fraudulent actions taken by a whole raft of shell companies purporting to be legitimate Web hosting and services providers.
The defendants allegedly used the shell companies to collect customer fees, obtain loans, and purchase goods and services. In the end, many of the customers were left without Web servers, the loans were not repaid, and many contractors -- including collocation service providers such as AT&T and Verizon -- were never paid, the indictment says.
Among the companies that were defrauded from March 2003 through July 2009 are AT&T, Verizon, XO Communications, SMARTnet VOIP, Waymark Communications, the lessors of the properties used by the shell companies in Dallas, various financial institutions, creditors and credit reporting agencies, and various other service providers, such as power companies, insurance companies, air-conditioning companies, and Website developers, the indictment says.
The total estimate of the fraud is more than $15 million.
"The conspirators created, purchased and used shell companies to hide the true identity of the owners or operators of the companies, or the relationships between the companies," the indictment says. "They assumed multiple fake identities to hide true ownership of the shell companies and made materially false representations to their victims -- by mail, fax, telephone, e-mail, or other communications -- to obtain goods and services from them."
The FBI raided Core IP initially back in April 2009, and CEO Matthew Simpson denied any wrongdoing.
If convicted of conspiracy, the defendants charge face a maximum statutory sentence of 30 years in prison and a $1 million fine. Several of the defendants also face obstruction charges that carry a maximum sentence of 20 years in prison and a $250,00 fine. If a defendant is convicted on a felony and also on false registration of a domain name, then the penalty for that felony conviction is doubled or increased by seven years, whichever is less.
Have a comment on this story? Please click "Discuss" below. If you'd like to contact Dark Reading's editors directly, send us a message.