from the welcome-to-the-big-leagues dept
After fighting for years, it appears that Paul Hansmeier realized he was cooked. On Friday, he pleaded guilty to various fraud and money laundering charges related to his copyright trolling under the Prenda name. Hansmeier, of course, was one of the two “masterminds” (and I use that term loosely) behind Prenda along with John Steele, who pleaded guilty last year, and was set to be a witness against Hansmeier, who came up with some colorfully ludicrous theories to try to talk his way out of these charges.
If you don’t recall, Hansmeier and Steele started out as garden variety copyright trolls, suing tons of people and shaking them down for money, but they kept expanding the scam, to the point that they were setting up bogus honeypots with content they themselves uploaded to get IP addresses to shake down (with hilariously dumb attempts to cover up that it was them). They also set up fake shell companies as their own “clients” which didn’t go over well in court. That’s not even getting to the way that Steele and Hansmeier were clearly the beneficiaries of these shakedowns, or the fact that they tried to hide the money. And do we even mention the outright lying in court?
One of the most incredible things in watching the whole Prenda saga over the years was just how much Steele and Hansmeier seemed absolutely 100% convinced that they could talk their way out of everything. No matter how bad it was getting, they would scream to the heavens about how everyone was lying about them and that eventually they’d be shown to be innocent. Yet now they’ve both pleaded guilty. Hansmeier’s plea agreement has him pleading guilty to mail fraud and wire fraud, along with conspiracy to commit money laundering. The “deal” is that prosecutors won’t charge him with even more crimes that they’ve since uncovered “including conduct associated with the defendant’s bankruptcy proceedings.” The agreement lays out much of the scam in pretty clear terms (the P.H. in the agreement appears to be Paul’s brother Peter Hansmeier who there are differing opinions about his level of involvement in the scam, P.D. is obviously Paul Duffy, who was another bumbling part of the scam, and who died a few years back of “chronic ethanolism” as all of this was unraveling):
Defendants Uploaded Clients’ Movies to File-Sharing Websites
Beginning no later than in or about April 2011, HANSMEIER and Steele caused
PH. to upload their clients’ pornographic movies to BitTorrent file-sharing websites,
including a website named the Pirate Bay in order to entice people to download the movies
and make it easier to catch those who attempted to obtain the movies. As defendants
knew, the BitTorrent websites to which they uploaded their clients’ movies were
specifically designed to aid copyright infringement by allowing users to share files,
including movies, without paying any fees to the copyright holders.
Defendants Obscured Their Involvement in the Lawsuits
In or about November 2011, in order to distance themselves from the copyright
infringement lawsuits and any potential fallout, defendants caused Prenda Law to be
created. Although P.D.–an attorney located in Chicago–nominally owned Prenda Law,
HANSMEIER and Steele exerted defacto control over Prenda Law, including the primary
direction of its employees and dispensation of its finances.
Additionally, beginning in or about 2011, defendants created various entities they
surreptitiously controlled, including AF Holdings LLC, Ingenuity 13 LLC, Guava LLC,
and LW Systems LLC. The defendants used these entities as plaintiffs in copyright
infringement lawsuits the defendants filed against individuals who had downloaded movies
the defendants had uploaded to BitTorrent websites.
Defendants Filmed Their Own Pornographic Movies
and Uploaded Them to File-Sharing Websites
Beginning no later than in or about May 2012, defendants participated in filming
pornographic movies. On at least three separate occasions in Chicago, Miami, and Las
Vegas, HANSMEIER and Steele–at times assisted by P.D., M.L., and P.H.–contracted
with adult film actresses and produced multiple short pornographic films. HANSMEIER
and Steele then caused Ingenuity 13 to obtain copyrights to the films, which bore names
such as “Five Fan Favorites” and “A Peek Behind the Scenes at the Show.” Shortly after
filming the movies, HANSMEIER instructed P.H. to upload the movies to file-sharing
websitessuch as the Pirate Bay in order to catch, and filed lawsuits against, people who
attempted to download the movies.
Defendants Concealed Actions from Courts
After uploading their clients’ and their own pornographic movies to BitTorrent
who purportedly downloaded the movies did so without “authorization” or “consent” from
the copyright holder or its agents and that their client had suffered “damages.” After filing
the initial complaint in these lawsuits, defendants then filed ex parte motions seeking to
obtain early discovery regarding the identities of the subscribers associated with the IP
Addresses used to download the movies, and therein represented to the court that the
unnamed defendants downloaded the movies without authorization. In each of these
lawsuits and the accompanying ex parte motions for early discovery, HANSMEIER and
Steele concealed from the court that they: (a) uploaded their clients’ movies to BitTorrent
websites, (b) filmed their own pornographic movies in order to upload them to BitTorrent
websites, and (c) owned and controlled the plaintiffs and thus had a significant personal
stake in the litigation. HANSMEIER and Steele knew that these facts were material to the
courts’ decisions whether to permit early discovery.
The courts, relying on the defendants’ lawsuits and motions, granted early discovery
and thereby authorized the defendants to subpoena internet service providers for subscriber
information associated with the IP Addresses set forth in the motions and/or civil
complaints. After obtaining the subscriber information associated with the IP Addresses,
the defendants sent letters and made phone calls to the subscribers seeking settlement
payments in exchange for dismissing the lawsuit against those subscribers.
Then there’s the discussion about the CFAA related scam that Prenda tried to pull:
Beginning in or about October 2012, HANSMEIER and Steele caused lawsuits to
be filed, generally on behalf of Guava LLC, falsely alleging that certain named defendants
had “hacked” into their client’s computer systems. In fact, and as the defendants knew,
the defendants named in these lawsuits had been caught downloading one of HANSMEIER
and Steele’s clients’ movies from a file-sharing website. These “defendants” had agreed
that, in exchange for HANSMEIER and Steele waiving a settlement payment, the
defendant would be sued and permit HANSMEIER and Steele to seek discovery about
his/her alleged co-conspirators. HANSMEIER and Steele brought several lawsuits falsely
alleging that these defendants had participated in hacking Guava’s computers in order to
attempt to obtain authority from the court to issue subpoenas to intemet service providers.
There’s much more in there as well.
For what it’s worth, kudos should be directed to the person behind the Fight Copyright Trolls website, who really was the first to not only call out Prenda’s bad behavior, but who figured out many of the details of the scam way before anyone else did. I’ll admit that some of that site’s early reporting seemed so outlandish that I was initially skeptical that it could possibly be accurate. But as more and more evidence came to light, basically everything that FCT initially suggested turned out to be incredibly accurate. Also, many kudos to the various lawyers who helped bring Prenda down in court in a variety of different cases, which helped highlight the details of the scam. I know I’m forgetting some, but Morgan Pietz, Nick Ranallo, Dan Booth, Jason Sweet and Erin Russell put in quite a lot of effort in unraveling Prenda in court.
Filed Under: guilty plea, john steele, paul hansmeier
Companies: prenda, prenda law