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July 29, 2015Kansas City, MO, United StatesIntellectual Property Rights and Commercial Fraud

Nevada man pleads guilty in Missouri to multi-million dollar piracy scheme

KANSAS CITY, Mo. — A man from India, living in Nevada, pleaded guilty in federal court Wednesday to his role in one of the largest software piracy schemes ever prosecuted by the federal government.

This guilty plea resulted from an extensive investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

Arunachalam Annamalai, 48, a resident of Las Vegas, waived his right to a grand jury and pleaded guilty to charges that he participated in the software piracy conspiracy. Annamalai is the owner and operator of Vegascart LLC.

The scheme, with co-conspirators in the People’s Republic of China and across the United States, illegally sold millions of dollars of Microsoft Corporation and Adobe Systems Inc. software product key codes through a charitable organization and several online businesses. More than $18 million in assets, including luxury automobiles and expensive real estate, have been seized through federal forfeiture complaints. Affidavits allege that conspirators reaped about $30 million in profits from customers who paid about $90 million for the pirated software.

By pleading guilty, Annamalai admitted that he conspired with others to sell unauthorized software product key codes from Microsoft Corporation on Internet websites, eBay auctions, online merchant services, and other means. Microsoft product key codes are used to obtain full access to unlocked, licensed versions of various Microsoft copyrighted software programs.

Annamalai also admitted that he purchased 2,569 counterfeit Microsoft software product key codes from co-conspirator Casey Lee Ross, 28, of Kansas City, Missouri, between March and December 2013. These software key codes are calculated at a loss amount of $250 each; therefore, the relevant loss amount in this matter is estimated at $642,250.

Ross and Matthew Lockwood, 37, of Denver, Colorado, have each pleaded guilty in separate but related cases to their roles in this same conspiracy.

According to court documents, the investigation began when federal agents in Kansas City, Missouri, learned in 2013 that Ross had purchased (and redistributed) tens of thousands of illegitimate and unauthorized Microsoft product key codes and counterfeit product key cards from suspect sources in China.

Ross admitted that he purchased 30,159 product key codes and counterfeit product key cards. Ross purchased these product key codes at prices well below that of the estimated retail price. In many cases, they were distributed on counterfeit card stock intended to make it appear as if they were genuine Microsoft products.

Ross (doing business as Software Slashers) distributed large quantities of these product key codes and counterfeit Microsoft product key cards to co-conspirators in the United States, who in turn sold the product key codes and counterfeit product key cards through their respective websites as well as on e-commerce sites such as eBay or Amazon.

Lockwood admitted that he paid Ross $1,127,190 for unauthorized product key codes and counterfeit product key cards. Lockwood also admitted that he paid $1,574,054 to unidentified persons in the state of Washington for various software items. Lockwood admitted that he obtained 6,165 certificates of authenticity, 4,996 “Lenovo” product key cards and about 11,000 unauthorized product key codes.

Under the terms of this plea agreement, the government and Annamalai jointly recommend a sentence of time served to trigger his immediate deportation to India. Annamalai also must enter into a stipulation of settlement in several civil cases in which the government has seized two residential properties and $212,930 from a bank account.