Amazon, iTunes scam nets British gang Madonna-like royalties

(CBS News) Members of an iTunes scam ring have been busted for using stolen credit cards to purchase their own music.

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The 11-member gang has earned over $800,000, according to the BBC. Running between January 2008 and June 2009, the scam reportedly involved thousands of credit cards and cost iTunes and Amazon anywhere from $1.2 million to $1.6 million.

The scam was carried out by using 24 laptops to purchase songs with the stolen credit cards on iTunes and Amazon to earn royalties. The gang uploaded songs by local man Denver White, known as DJ Denver, and collected royalties using Tunecore, CD Baby and SongCast.

Purchases were kept under $16 to go undetected, but iTunes began suspecting fraud when they noticed that an unknown artist in England was earning royalties on par with hit-makers.

"iTunes realized that they were paying money to virtually unknown musicians in the Wolverhampton area of the West Midlands at a rate they would normally expect to be paying to Madonna," said prosecutor Helen Malcolm.

The Telegraph reports that Tunecore helped bring the gang to light by withholding royalties until the account holder came to New York to collect, citing tax purposes. Tunecore offered free airfare. At that point, White's name and address was revealed.

The gang was able to temporarily hide their location by using the proxy service "Hide My IP," but officials said the software didn't work as well as they had hoped. Ultimately, police were able to track down the defendants through their PayPal accounts and email addresses, the Telegraph reports.

According to the Daily Mail, "11 defendants pleaded guilty to conspiracy to defraud, money laundering or possession of criminal property."

Five members faced jail time, one was sent to a young offender's institution and the rest were given various sentences, the BBC reports.