Markets Wired

The operators of a massive mobile cramming scheme have agreed to surrender more than $10 million in assets to settle Federal Trade Commission charges, including the contents of numerous bank accounts; real estate in Los Angeles, Beverly Hills and Chicago; and a number of cars and pieces of jewelry.

“Cramming unauthorized charges on consumers’ phone bills is unlawful, and this settlement shows the FTC is committed to making sure that anyone who does it won’t be able to keep their ill-gotten gains,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers have the right to know what they are being charged.”

Under the terms of the settlement, Lin Miao and the corporate defendants will be permanently banned from placing any charges on consumers’ phone bills, making any misrepresentations to consumers about a product or service or a consumers’ obligation to pay, and will also be prohibited from charging consumers for a product or service without their express consent.  The settlement includes a monetary judgment of more than $150 million, which is partially suspended based on Miao’s inability to pay the full amount after he turns over nearly all of his and the companies’ assets.

Among the assets Miao and the corporate defendants will be required to surrender under the terms of the settlement are:

• the contents of 14 bank accounts and one life insurance policy, less $5,000;
• five real estate properties, including three in Chicago and one in each in Los Angeles and Beverly Hills;
• four vehicles, including a 2013 Mercedes SUV, a 2014 Range Rover SUV, a 2011 Audi and a 2008 Bentley; and
• numerous items of jewelry, including three Patek Phillippe watches, a Tiffany watch, two Tiffany rings with 10 and eight carat diamonds, a pair of six-carat Tiffany  earrings, and a Tiffany necklace, bracelet and diamond bracelet.

The FTC filed its complaint against Miao, along with the corporate defendants Tatto, Inc., Shaboom Media, LLC, Bune, LLC, Mobile Media Products, LLC, Chairman Ventures, LLC, Galactic Media, LLC, and Virtus Media, LLC, in December 2013.

The complaint alleged that Miao and the other defendants pitched text message services offering “love tips,” “fun facts,” and celebrity gossip alerts, but placed charges for these services – typically $9.99 a month – on consumers’ bills without their permission — a practice known as mobile cramming. They also allegedly used deceptive websites designed to collect consumers’ mobile phone numbers that would then be billed for the services.

The charges appeared on consumers’ phone bills under confusing names such as “77050IQ12CALL8663611606” and “25184USBFIQMIG” and in many instances, consumers did not notice the variations in the amount of their bills from month to month. When consumers did notice the charges and attempted to seek refunds, the process was often highly cumbersome, with some promised refunds from the defendants never arriving, or consumers receiving only partial refunds from their phone company.    

The Commission vote approving the proposed stipulated order was 5-0. The FTC filed the proposed order in the U.S. District Court for the Central District of California, and it was entered by the court on June 11, 2014.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.       

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.