Three indicted for selling pirated phone system software worth $88 million

Three people have been charged with selling more than $88 million worth of stolen software licenses from Avaya Direct International related to a telephone system product called IP Office, which is used by thousands of companies around the world. The FBI conducted the investigation, which led to their charges of federal wire transfer fraud and money laundering.

3 Indicted for Avaya Piracy Fraud

The Grand Jury of the Western District of Oklahoma charged the following defendants with conspiracy to commit wire fraud and 13 counts of wire fraud: Raymond Bradley Pearce, aka Brad Pearce, 46, of Tuttle, Oklahoma; Dusti O. Pearce (Brad’s wife), 44, of Tuttle, Oklahoma; and Jason M. Hines, aka Joe Brown, aka Chad Johnson, aka Justin Albaum, 42, of Caldwell, New Jersey. In addition, the grand jury charged both Brad Pearce and Dusti Pearce with one charge of conspiracy to commit money laundering and money laundering.

Here’s how the three compromised the software licenses, according to the indictment:

How the Avaya software licenses work

To enable additional functionality of IP Office, such as voicemail or more telephones, customers had to purchase software licenses – which Avaya generated – from an authorized Avaya distributor or reseller. Avaya used software license keys to control access to Avaya’s copyrighted software and to ensure that only customers who paid for the software could use it.

What the Pearces and Hines were doing, according to the indictment?

Brad Pearce was a customer service representative at Avaya and allegedly used his system administrator privileges to generate tens of millions of dollars in ADI software license keys. Pearce sold the license keys to Hines and other customers, who in turn resold them to resellers and end users around the world. The retail value of each Avaya software license ranged from less than $100 to thousands of dollars.

Pearce also hijacked the accounts of former Avaya employees to generate additional ADI software license keys. He changed information about the accounts to hide that he was generating ADI license keys, which prevented Avaya from discovering the fraud for years. Brad Pearce’s wife, Dusti Pearce, is said to have handled the bookkeeping and helped the financial side of the illegal trade.

Hines operated Direct Business Services International (DBSI), an unauthorized Avaya reseller, in New Jersey. He is said to have purchased software licenses from the Pearces under his own name and also using an alias, Joe Brown. Hines was reportedly one of the largest users of the ADI licensing system in the world and Pearce’s largest customer.

Wiring fraud impacted Avaya’s profits, as well as global market prices

According to the indictment, Pearce and Hines’ operation not only prevented Avaya from making money from its stolen intellectual property, but also undermined the global market in Avaya ADI software licenses because the Pearces and Hines sold licenses for significantly below wholesale price.

The Pearce’s and Hines laundered money

In total, the Pearces and Hines would have reaped millions of dollars from the fraud. In addition, in order to hide the nature and source of the money, the Pearces allegedly funneled their illicit profits through a PayPal account created under a false name to multiple bank accounts and then transferred the money to numerous other investment and bank accounts. They are also said to have bought large amounts of gold and other valuable items. The indictment lists numerous assets subject to forfeiture, including cash, gold, silver, collectible coins, cryptocurrency and real estate.

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