Rich Lister Zhenya Tsvetnenko charged by US authorities over alleged involvement in “multimillion-dollar” text message fraud

Perth-based Rich Lister Zhenya Tsvetnenko has stepped down from positions at two companies he founded, days after US authorities charged the technology entrepreneur over his alleged involvement in a fraudulent text messaging scheme worth millions of dollars.

Tsvetnenko, who debuted on the BRW Rich List with estimated wealth of $107 million in 2009, stepped down as chairman of digital currency firm DigitalX and as non-executive director of online marketing firm Mpire Media on Monday.

Both companies listed “personal reasons” for the resignations in announcements to the Australian Securities Exchange.

A spokesperson for the entrepreneur said he will defending all allegations against him but will not be making further comments as the matter is before the courts.

The US Attorney’s Office for the Southern District of New York said the charges relate to the period between 2011 and 2013.

The US Attorney’s Office alleges that Tsvetnenko, along with at least seven other people, used a practice called “auto-subscribing” to charge consumers for “premium” text messages on a monthly basis without their consent. Examples of “premium” text messages include horoscopes, celebrity gossip or trivia.

While US authorities said consumers would often delete the unsolicited text messages “often believing them to be spam”, they were charged US$9.99 a month until they unsubscribed from the service.

Tsvetnenko has been charged with one count of conspiracy to commit wire fraud and mail fraud, as well as one charge of wire fraud along with seven other people. He is also facing one charge of conspiracy to commit money laundering, along with five other people.

In a statement issued on Friday, the US Attorney’s Office said Tsvetnenko is one of three additional defendants in the case, along with US-based Fraser Thompson, a former executive at mobile aggregation company Mobile Messenger, and US-based Francis Assifuah, who the Attorney’s Office said ran a digital content provider.

While the US Attorney’s Office said Thompson and Assifush have been arrested, Tsvetnenko has not.

The other defendants in the case were previously charged in relation to their alleged involvement.

The US Department of Justice alleges Tsvetnenko became involved in the “multimillion-dollar” scheme in 2012 when he was given permission to auto-subscribe consumers to receive the text messages through a US-based mobile aggregator.

“By no later than April 2012, Tsvetnenko has started auto-subscribing consumers,” the US authorities said in the statement.

“Over the course of the next several months through mid-2013, Tsvetnenko and the Australian Content Providers auto-subscribed hundreds of thousands of phone numbers through the US mobile aggregator, and generated millions of dollars of revenue, which the defendants apportioned among themselves and were used to fund a lavish lifestyle of expensive vacations and gambling.”

While the US authorities did not specify an exact figure alleged to have been defrauded from consumers, the indictment for the case refers both to a “multimillion-dollar” amount and “tens of millions” of revenue.

Tsvetnenko generated his early wealth in the early 2000s when he worked from home to pioneer SMS gateway technology and Google AdWords.

The software engineer listed his bitcoin company Digital CC Limited via a reverse takeover of energy investment firm Macro Energy in early 2014 and was once an investor in tech startup Alphatise.

He listed online marketing business Mpire Media in 2015 through a backdoor listing with shell company Fortunis Resources and more recently, has been involved with Future Penny, a financial literacy startup.

At the end of 2014, BRW estimated Tsvetnenko’s wealth to be $67 million.

SmartCompany was unable to contact Thompson and Assifuah for comment.