Zhenya Tsvetnenko Zhenya Tsvetnenko must
have felt like he was on top of the world. He and his family emigrated from Russia to Perth,
Australia, when he was 13, and by 29, he was worth over $100 million.
Zhenya originally went to university to study electrical engineering but
eventually dropped out of college. He developed a system that automatically
delivers entertainment products to people's phones through SMS messages.
Zhenya and his wife Lydia were socialites in Perth and were frequently seen at red carpet events.
Their lavish wedding cost $600,000, and the couple arrived in a horse-drawn carriage.
The wedding ended by releasing hundreds of butterflies before heading off to the reception.
Inside the $80,000 venue, decorated with $12,000 worth of black silk and over $60,000 in flowers,
Zhenya played an original guitar song for his bride.
The couple drank bottles of 1986 Penfolds Grange Hermitage, which cost $2,000 each.
Finally, after a night spent under crystal chandeliers, Zhenya and Lydia
got on a helicopter to the airport, and they flew to their honeymoon in Southeast Asia.
In 2007 Zhenya launched his own record label, creatively named Zhenya Records.
The label signed a band and claimed they would capture the international market,
but it doesn't seem like much came from that.
The couple had 7 homes in Australia and another overseas, and both Zhenya and
Lydia had their own Lamborghinis. Zhenya also owned a Ferrari, a Bentley GTC,
a Mercedes SLK, and a Hummer and said he made more money than he could count.
For Lydia's 29th birthday party, Zhenya flew her to Los Angeles, where he spent $1 million
on a private performance from Snoop Dogg. For his 30th birthday, Lydia arranged for ice sculptures
of his Lamborghini and Ferrari to be carved and a cake with Zhenya's face on a $100 bill.
Lydia Gaugg Lydia Gaugg worked
at a high-end fashion boutique in Perth and first met Zhenya in a nightclub. She supported
Zhenya financially while he was developing his business. Once he made his fortune,
he told her to quit her job. Eventually, Lydia started a fashion company called House of Zhivago.
House of Zhivago was sold in over 60 boutiques across the world and was
worn by celebrities including Kylie Jenner, Lady Gaga, Katy Perry, Nicole Scherzinger,
and Madonna. Lydia has never been charged with any crimes related to her husband's dealings.
Still, it's hard to imagine she had no idea what was happening.
Considering that she had been with Zhenya since before he first developed his SMS technology,
it would only make sense to assume the two discussed things along the way.
It would be strange if she never asked how he made so much money so fast.
Smoke and Mirrors Zhenya may seem like an
honest man with a "rags to riches" success story, but that was far from the case.
Zhenya was running a scam where he would subscribe people to his SMS service without their consent.
People would receive messages about celebrity gossip, trivia, horoscopes,
etc., and usually delete or ignore them, thinking it was spam, but they would be charged
$9.99 each month. These charges were disguised as random letters or numbers on their bill,
so they had no idea what they were or how to get rid of them.
Zhenya worked with a man named Darcy Wedd, who owned a U.S.-based company
called Mobile Messenger. Darcy was also from Perth but lived in Los Angeles, California.
Wedd was also quite wealthy and held over 3.4 million in real estate in California and Nevada.
Wedd drove a Maserati and had an American Express Black Card.
In addition to his telecommunications business,
he was also involved in producing movies with Susan Sarandon, Courtney Cox, and Sharon Stone.
Darcy's company, Mobile Messenger, knew that Zhenya was considered a bad actor
and was well known for auto-subscribing. Even still, Wedd's company provided the US numbers
to Zhenya and information to make it appear like the customers had signed up when they hadn't.
If somebody tried to contact the company to cancel these text messages or get a refund,
they would usually ignore them. This scam ended up making the men over $41 million.
Zhenya and Wedd also laundered their money. They would transfer the cash from one bank account into
a shell company set up in someone else's name to conceal where the money was coming from.
Auto-Subscribing These types of scams
aren’t uncommon, and the FTC refers to them as "negative
options." It's not a problem or illegal if a service signs a customer up for a
recurring charge. In the case of Zhenya's scam, it was nearly impossible for someone to cancel.
This has happened in a few other high-profile scams, including Match Group, the owner of Tinder,
OkCupid, and Match.com. In 2019, the FTC filed a lawsuit against Match.com for misleading users
by telling them they would get 6 months free if they didn't meet someone special.
Match.com users had to submit a photo within the first 7 days and then contact at least 5
people each month. When the 6 months were up, the users were asked if they had met anyone,
and if they said yes, even if it didn't work out, they were disqualified from the
guarantee. The FTC also said it was confusing for customers to cancel their subscriptions.
The FTC also sued a company called ABCmouse, which was a learning program for children,
because the company didn't explain they would be charged after their free trial
ended. And once again, it was tough for somebody to figure out how to cancel the subscription.
A cosmetic and supplement company, AH Media, also conned people into thinking they would
just pay a shipping fee for a product. After paying, the customers were charged $90 and then
entered into a monthly subscription. Just like Zhenya and Wedd, AH Media
laundered their money through shell companies. Recently, a group of Senators introduced the
Unsubscribe Act, forcing companies to make canceling a service as easy
as signing up. It would also force companies to notify customers when a trial is finished.
In 2018 California passed a state law that requires companies to provide a very
clear explanation when the price changes after a free trial. The
law also forces these businesses to get consent from a customer before they are
charged automatically. They must also give customers information about how to cancel.
Busted In July 2016, Zhenya was
charged in the US with wire fraud, conspiracy to commit wire fraud, and conspiracy to commit
money laundering. Each charge carries a maximum sentence of 20 years. In 2018, just a few days
before Christmas, he was arrested at his luxury riverside apartment by Australian federal police.
The US government said they were seeking extradition for the 2016
charges and that Zhenya was part of one of the biggest scams in US history. All in all,
the auto-subscribing scam had stolen more than $196 million from US citizens.
Earlier in 2018, Wedd was sentenced to 10 years in prison. Another man named Fraser Thompson,
who worked for Wedd's company, was sentenced to 5 years. For the moment,
Zhenya hadn't been tried, but he was now in an Australian prison waiting on an extradition trial.
Zhenya's lawyers were trying to get him released, and Lydia and Zhenya's mother wrote letters to
the court showing he should be granted bail. The judge denied it and said Zhenya was a flight risk.
Zhenya would have to remain in jail while he fought his extradition case.
Fighting extradition
Zhenya was being held in Hakea prison. The man who once hung out with actors and musicians
now hangs out with accused serial killer Bradley Robert Edwards. His lawyers claimed that Zhenya
had a spinal condition and suffered depression, anxiety, and panic attacks.
Lydia asked that he be released because his children had been experiencing
negative emotional and mental impacts since he was put in jail. She said she had noticed
changes in the kids and was worried about how they would cope if their father remained in prison.
The accused scammer applied for bail 2 more times, but they were also denied by a judge. His team
filed a petition with the UN Human Rights Committee saying that he should be allowed
bail during the trial because he was innocent unless proven guilty. That petition was denied.
Finally, after almost 3 years in custody, Zhenya had a 4-day extradition hearing. Just as the
hearing started, Zhenya threw in the towel and agreed to be extradited to the United States.
After Zhenya made his decision,
he was flown to the US and held in jail while he waited for his trial to start.
Voyeur Bar Before his arrest,
Zhenya and another man, Malcolm Day, had invested in a club called Voyeur Bar.
Malcolm Day was the founder of AdultShop, Australia's largest online retailer of adult toys.
Voyeur Bar had private booths with bottle service and even a VIP toilet for people
who didn't want to wait in line. In addition to the bar, there were offices and a radio station
upstairs. In December 2018, somebody tried to burn Voyeur Bar down twice within 1 week.
Voyeur Bar had over $100,000 of damage and closed down afterward. The police
have arrested and charged a man with arson, but others might smell an insurance scam,
especially with Zhenya involved.
Moving On Lydia initially
seemed to support Zhenya even though the couple had split up shortly before he was
arrested. She had gone to his hearings and wrote a request for Zhenya to be released.
When Zhenya finally surrendered, Lydia wasn’t there to support him.
Shortly after Zhenya was extradited to the US,
she was spotted with a new boyfriend named Ben Newport. Lydia was still running her
fashion label and recently posted photos on her social media in a wedding dress.
She does have 2 children with Zhenya, and after they split up, they said they were on good terms,
but it's unclear if she remains in contact with Zhenya now that he's in the United States.
What’s clear is that Lydia realized time was running out for her husband after seeing Wedd
and Thompson get charged and convicted in the US.
Maybe she didn't want to risk her business becoming involved with bad press coverage.
Aftermath Zhenya was tried in the
United States and pleaded guilty to conspiracy to commit wire fraud and money laundering. He
admitted that he knew what he did was wrong but justified it because it wasn't a lot of money.
Zhenya went on to say that he was fooling himself, was ashamed of what he'd done,
and always knew it would catch up with him one day. The scammer asked
to be released back to Australia because he had served almost 4 years already.
Before he was sentenced, 48 people – including family, friends, business associates,
and even inmates locked up with Zhenya – wrote letters to the judge asking her to go easy.
When it was time for the judge to make her ruling,
she sentenced Zhenya to more than 8 years in a US Federal prison. The judge also said
that Zhenya would have to pay back over $15 million, and he has already done so.
After the sentencing, the US attorney, Damian Williams, remarked that Zhenya got what he
deserved because he, Wedd, and the others involved made a fortune by scamming people.
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