Five people were taken into custody by the FBI Tuesday morning as part of a complex sting operation. The bureau's Computer Crimes Section in the Central District of California, said it targeted hackers allegedly developing and distributing software and hardware for pirating satellite television signals.
Tuesday's arrests bring the operation's total tally to 17 people across 7 states, with a number of the accused indicted for violating the anti-decryption provisions of the Digital Millennium Act (DMCA) (define).
The indictments mark the first time the controversial DMCA has been used in the Central District of California, and only the second time that a grand jury in the U.S. has issued an indictment under the statute. Other charges issued including manufacturing a device for the purpose of stealing satellite signals, and conspiracy. All three counts carry a maximum possible sentence of five years in a federal prison. The first two charges each carry a potential fine of $500,000, while the conspiracy count carries a maximum fine of $250,000.
The arrests were part of a yearlong investigation called "Operation Decrypt," which uncovered an alleged ring of hackers that used secret online chat rooms to exchange data and techniques to circumvent the security of Hughes Electronics unit DirecTV and EchoStar Communications' DISH Network.
"This case demonstrates our commitment to identifying and prosecuting sophisticated computer hackers who steal the intellectual property of others for their own economic benefit," said United States Attorney Deborah W. Yang. "No matter how sophisticated the criminals are, we will uncover the devices they create and the strategies they use to steal the lifeblood of the business community."
Yang said the alleged pirates caused millions of dollars in losses to DirecTV and DISH Network, as well as NDS and NagraStar, developers and suppliers of proprietary encryption and smart card technology for DirecTV and DISH Network respectively. Additionally, Yang said the Motion Picture Association of America (MPAA) loses millions of dollars every year in unpaid royalties when satellite programming is stolen.
One of the accused, software and hardware developer Randyl Walter, 43, of West Los Angeles, pleaded guilty on Dec. 18, 2002, to manufacturing satellite signal decryption devices and also admitted to causing more than $14.8 million in losses to satellite companies.
Among those charged with violating the DMCA are:
- Chad Fontenot, 26, of Richmond, Kentucky, arrested Tuesday morning on
charges of conspiracy, satellite signal theft and violating the DMCA for
designing and manufacturing hardware devices. Fontenot, a software and
hardware developer who was known by the screen names "FreeTV" and
"FreeTV2," was indicted on Jan. 23, 2003, but the losses caused by his
alleged activities have not yet been determined.
- Jason Hughes, 19, of Mocksville, North Carolina, who has agreed to
plead guilty to violating the DMCA for developing and distributing software
designed to circumvent smart cards for DirecTV. Hughes, a software
developer who was arrested Tuesday morning, said he made $50,000 selling
his software to individuals in Canada.
- Edward Vanderziel, 35, of Ontario, California, was indicted on Jan. 23,
2003, on charges of conspiracy, manufacturing signal theft devices and
violating the DMCA. Losses caused by Vanderziel's alleged activities remain
undetermined. Vanderziel is a software developer who allegedly sold monthly
subscriptions for software code for circumventing DirecTV's conditional
access technologies
- Michael Whitehead, 37, of Boca Raton, Florida, indicted on Jan. 23,
2003, on charges of conspiracy, manufacturing satellite signal theft
devices and violating the DMCA for his alleged nationwide distribution of
devices for circumventing the conditional access technologies in smart
cards. Losses caused by Whitehead's alleged activities remain undetermined.
- Peter DeForest, 30, of Seadrift, Texas, indicted on Jan. 30, 2003, on
charges of manufacturing satellite signal theft devices and charges under
the DMCA for manufacturing "unloopers" which are used to circumvent smart
card technology.
- Linh Ly, 38, of Rosemead, California, who agreed Tuesday to plead
guilty to violating the DMCA and distributing decryption hardware that
caused a loss of $561,507.48.
- Richard Seamans, 52, of Chino Hills, California, who was indicted on
Jan. 30, 2003 on charges of violating the DMCA and distributing decryption
devices.
Others arrested in Operation Decrypt include:
- Software developer Daniel Wilson, 33, of Houston, who has plead guilty
to manufacturing satellite signal theft devices. Wilson developed freeware
for circumventing conditional access technologies that was widely
distributed on the Internet.
- Stephen Thornton, 36, of Redondo Beach, California, 36, who has plead
guilty to developing satellite signal theft devices by writing software to
circumvent smart card technology.
- Christopher Humbert, 20, of Terre Haute, Indiana, who has plead guilty
to creating software code used to circumvent smart card technology.
- Gary Bumgardner, 46, of Kernersville, North Carolina, who has plead
guilty to manufacturing and distributing satellite signal theft devices
including hacked access cards. Bumgardner admitted his actions lead to a
loss of $68,732.16.
- Thomas Sprink, 41, of Cocoa, Florida, who has plead guilty for selling
hardware devices. Sprink admitted to causing a loss of $24,547.20.
- Dennis Megarry, 39, of Ostrander, Ohio, who was arrested Tuesday
morning based on a criminal complaint filed against him for distributing
illegal hardware devices.
- Robert Walton, 37, of Temple City, California, who was arrested Tuesday
morning on charges of conspiracy and manufacturing satellite signal
devices.
- Thomas Emerick, 33, of Ontario, California, who has plead guilty to
distributing decryption devices and reprogramming smart cards, and has
admitted to causing $70,000 in loss to the satellite companies.
- Joseph Bolosky, 30, of Panorama City, California, who has agreed to
plead guilty to charges of manufacturing decryption devices and admitted
causing a loss of $245,472.00.
Yang said Tuesday that Operation Decrypt is an ongoing investigation being handled by the Cyber Crimes Squad in the FBI's Los Angeles Field Office, and is part of the Attorney General's Computer Hacking and Intellectual Property program.
"There is definitely a strong possibility of others getting charged in the future," a spokesman for Yang told internetnews.com.
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