Scam to swindle music royalty payments from iTunes and Amazon exposed in UK

itunesA group of eleven criminals in the UK have been jailed or given suspended sentences, after a plot to defraud iTunes and Amazon out of music royalty payments was discovered. The scam ran from early 2008 until mid-2009, and although the majority of the trial took place in 2010, reporting restrictions have only just been lifted.

While fraudulent iTunes accounts have been exposed in the past, this time the criminals used the unusual method of uploading music, then purchasing it to receive royalty payments, a scam believed to be the first of its type in the country.

At first, it sounds perfectly legal, except stolen and cloned credit cards were used to pay, while other members of the gang continually downloaded the tracks to ensure royalties were earned. So many songs were downloaded in fact, that one of the artists made it onto iTunes’ most downloaded chart.

In order not to arouse suspicion from the credit card holders, payments of less than £10 were made, and the gang went on to net nearly £500,000 ($800,000) and cost Amazon and iTunes between £750,000 and £1 million ($1.5 million), after compensation had been paid to those whose credit cards had been used.

An investigation was launched after Apple realized it was paying royalties to various completely unknown artists from Wolverhampton, England “at a rate [we] expect to pay someone like Madonna.”

The music wasn’t Madonna’s though, and the 20 or more tracks used came from several local musicians contacted by the scam’s ringleader, including Denver White, A.K.A. DJ Denver, and James Batchelor, A.K.A. ReggiMental.

By using 24 identical laptops and software to hide their identity, the gang uploaded music to iTunes and Amazon using different digital music distributors, and the scam exploited a loophole that allowed the criminals to pay a flat fee to a distributor, but pocket the royalties themselves.

The leader of the gang received a sentence of four years and eight months in jail, while musician DJ Denver was cleared earlier this week.