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AT&T, Verizon, Jawa Make Millions From SMS Scams?
Party Could Come To An End For Scottsdale Company
by Karl Bode 12:27PM Friday Mar 25 2011 Tipped by tmpchaos See Profile
Earlier this month Verizon sued a company by the name of Jawa and twenty other related shell companies all run by a man named Jason Hope. According to Verizon, Hope has been engaged in an elaborate string of text messaging schemes for more than a year. The schemes, according to Verizon, involved the forced sale of frequently useless SMS services, covered up by what Verizon calls "sophisticated cloaking software" to misdirect auditors to shell websites compliant with Verizon's consumer protection and disclosure policies. Jawa and Hope meanwhile claim Verizon knew about this all along and took 30% of profits:
quote:
Click for full size
In a counterclaim, Jawa said that its business practices follow industry standards and are not fraudulent and that Verizon is working to ruin its business by cutting off all sources of its funding. "Verizon has willingly accepted and retained the profits over the last four years from what it now describes as a 'criminal enterprise' even though, during this time, it audited these practices," the claim, filed Monday, stated.
The blog AZ Disruptors has been tracking Hope and Jawa's methodology, and created this interesting video that explains precisely what Jawa's doing. Specifically -- users receive an SMS telling them to "Text back STOP if you don't want to subscribe." Most smart users ignore this message thinking it's a scam -- but in this case ignoring the message ensures you enroll in the scam service and are charged $10 a month. The blog notes that Hope is busily building a 100,000 square foot home in Scottsdale off of the profits made the last four years.

As AZ Disruptor notes, wireless carriers like AT&T and Verizon might not be trying particularly hard to put a stop to these scams, given they soak up 30-50% of the profits made. The blog calls AT&T to see why they can't put a stop to such practices, and is told (at minute 4:00) that AT&T has no ability to stop these scams from happening, and that AT&T doesn't profit -- neither of which is true.

Many regulators appear to be napping through this entire affair, though the state of Texas has also sued Jawa, placing a temporary restraining order against the company. While it's very likely Verizon filed suit to shift blame only after the company's exploits started being investigated by Texas regulators, they've at least set up a website intended to provide refunds to Jawa scam victims. Hamid Shojaee at the AZ Disruptors blog is asking all the right questions, and has a series of posts on the subject that are all worth reading. One amusing thing we noticed: CEO Jason Hope's old luxury car blog URL, which highlighted his acquisition of Lamborghinis, now directs users to his philanthropy work.

Update: AT&T has sent us this statement in response to this story:
quote:
We are aware of the alleged scheme outlined in the Verizon lawsuit, and we have retained a nationally recognized cyber fraud expert team to investigate JAWA to determine as quickly and effectively as possible whether or not the allegations are accurate. JAWA has agreed to cooperate by allowing these independent investigators full access to data and records. In the interim, we have suspended the short codes identified in the complaint, and have identified and suspended additional related short codes.


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jmn1207
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reply to CWRU

Re: Unfriggin believable

said by CWRU :

How is it illegal? if you do NOT reply back to the message than it is YOUR fault for not opting out of the service. Companies - including your cell carrier- do sell your information and share it with 3rd parties. Who knows where that information goes after its shared and sold to their partners. They sell it again and again? Of course they do. That is why you OPT OUT in the first place and you won't get charged. It's not illegal. they provided content that the customer surely agreed to by not opting out by replying STOP in the first place. VZ can try to sue them all they want; their website is legal and they provide apps and content to people They give you all of the terms; not their fault if YOU and others FAIL to read the Terms.

If you don't want our company to take 75% of your salary each pay period, be sure to press the big green button at our Denmark offices. If you can't get to Denmark in time, or simply ignore this, too bad for you.