FBI, DOJ Crack Satellite Piracy Ring

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 Copyright Act (DMCA) .

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

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
  • 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.

Thor Olavsrud
Thor Olavsrud
Thor Olavsrund is a journalist covering data analytics, security, infrastructure, and networking for CIO.com. He's especially interested in companies that use data to transform their business to tackle problems in innovative ways. As senior writer, his articles focus on practical insights, analysis, and business use cases that can help CIOs and other IT leaders navigate the shifting IT landscape.

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