Sick with the flu all weekend I’d gone to bed early Sunday night (1/15/12) only to be awakened by two back-to-back text messages arriving on my iPhone. Having been in the internet/web industry since its beginning in the mid-1990s, I instantly recognized the potential for charges from this spammer so I sat up, grabbed my iPad, and started poking around to see if either the shortcode (the “318-50″) or the toll-free 866-861-1606 number was an active scam.
I was stunned to learn it is a scam. Not only that, based upon the sheer volume of complaints I found shows that this is rampant, apparently is seeing little-to-no preemptive action on the part of the wireless carriers, and many, many mobile users are being charged monthly fees. This fraud is commonly known as cramming.
I am writing this post for the express purpose of bringing this issue to your attention and that of Lori Swanson, our State Attorney General, in order to get some action and protect consumers. If *I* can get scammed (and I am VERY cautious, careful and savvy about online scams and still don’t know how my number was discovered). I can only guess how pervasive this is in Minnesota and that it appears the carriers are likely complicit in perpetuating these cramming scams due to conflicts of interest and their subsequent inaction.
This is a mobile SMS (text message) scam which automatically subscribes the user to a monthly plan, in my case a $9.99 one as you can see from the screenshot to your right. What’s curious is that many people on several complaint forums I discovered recommended replying “STOP” to cancel since that would be an explicit opt-out. In my case I didn’t respond (never do to spam) and instead called AT&T Customer Service.
The charges were applied anyway which, I now know, is a common cramming practice. AT&T removed the charge and I explicitly requested they place a “subscription block” under my parental controls for all phones on my family plan. This part of the adventure burned up 45 minutes of my time.
During my short investigation last night for another 30 minutes, I came across these links to other people who have been victims of cramming from this same provider and have had similar charges:
- 800 Notes, a website for 800# scamming, had these reports
- SMS Watchdog, a website for text scamming, had these reports
- Text Complaints had these reports
- Plus all of these other ones…
…and so on and so on. But wait until you see how this cramming is potentially worth tens of millions of dollars per year for the scammers!
AN EXAMPLE OF AN ALLEGEDLY SIMILAR SCAM
While I have NO idea if the company identified below is responsible in any way for the cramming scam which I encountered last evening, I also was not aware of how huge this fraud could be. This example below illustrates the scope of the problem so well I had to include it (and, especially, the video which explains the tactics used by these cramming scammers and how it works).
During my investigation last night I came across another geek site, AZ Disruptors, a tech incubator whose website is similar to Minnov8‘s and Tech.MN‘s but for Arizona. The site’s founder, who is also CEO of Axosoft, Hamid Shojaee, discovered early last year what appeared to be an alleged Scottsdale-based mobile scammer named JAWA, a dba of Eye Level Holdings, LLC, and one of several dba’s of this LLC.
Last March Shojaee wrote a post about how he discovered he’d been a victim of cramming. Two days later he wrote another post explaining how this sort of text messaging cramming scam worked and the video he created to explain it is below. Shojaee’s explanation will give you a good sense of what’s going on with this cramming scam:
After writing subsequent posts JAWA’s lawyers sent Shojaee a cease-and-desist, shut down his blog temporarily, but the AZ Central paper wrote this article pointing out that Verizon alone froze $19 million in charges…so I can only imagine the millions JAWA and the aggregators have already raked in:
Lawsuits filed by Verizon Wireless and the Texas attorney general allege that cellphone-applications developer Jawa used shell corporations, false business addresses, websites that did not comply with industry standards and diversionary software to deceive customers to buy its services.
Beyond the lawsuit, Verizon Wireless has taken other business actions. It instructed four companies, known as aggregators, to freeze $19 million in charges for messaging services already provided by Jawa and for which customers already have been billed.
Aggregators, known as mobile-transaction hubs, enable wireless messages to be delivered to a customer and compile and transmit charges to the customer’s carrier.
As it turns out, Verizon kept 30% of the fees collected and passed the other 70% to the aggregators (see this article). Other articles I’ve read say the same thing about all carriers: they keep 30% of the fees. If those fees number in the tens of millions of dollars, one can see why the carriers have zero incentive to be on their customer’s side and proactively terminate these sleazy relationships.
In my cursory search I was unable to learn if there has yet been a resolution to the Eye Level Holdings, LLC. suit by the State of Texas and Verizon. AT&T and Sprint are also investigating them so there might be a resolution that, if JAWA/Eye Level Holdings, LLC is guilty of cramming, puts these guys behind bars and confiscates their assets.
WHAT YOU SHOULD DO
But as we all know for every scumbag caught there are usually others. Check your mobile phone bill for charges you didn’t authorize. Consider putting a block on your account so, even if a crammer gets your mobile number, they cannot include you in their scam.
If you have already been a victim of this cramming scam, immediately file a complaint with the Minnesota Attorney General’s office.