Chinese Citizen Pleads Guilty To $100 Million Internet Software Piracy Conspiracy

WILMINGTON, Del. – Xiang Li, age 36, of Chengdu, China, pled guilty late yesterday to one count each of conspiracy to commit criminal copyright infringement and conspiracy to commit wire fraud, for his role in operating a website used to distribute over $100 million worth of pirated software around the world.  Li, who will be sentenced on May 3, 2013 by United States District Judge Leonard P. Stark, faces a maximum sentence of twenty five years in prison, a fine of $250,000, and 3 years of supervised release following his prison sentence.  The entry of the guilty plea was announced at a press conference held this morning by Charles M. Oberly, III, United States Attorney for the District of Delaware and John Morton, Director, United States Immigration and Customs Enforcement. 
           
According to statements made at the plea hearing and documents filed in court, the U.S. Department of Homeland Security, Homeland Security Investigations, identified Xiang Li as the operator of a website located at www.crack99.com that was advertising thousands of pirated software titles at a fraction of their retail value.  The investigation revealed that Xiang Li used the CRACK99 website to distribute pirated or cracked software to customers all over the world, including the United States.  Software is “cracked” when its digital license files and access control features have been disabled or circumvented. 

Through emails sent to customers of his website, Xiang Li described himself as being part of “an international organization created to crack” software.  In a November 2008 email exchange with a customer, for example, Xiang Li stated that he would charge $1,000 to obtain a cracked version of a particular software program.  When the customer wrote, “Yes ok tell me who do this,” Defendant replied:  “Experts crack, Chinese people Sorry can not reveal more.” 

During the course of the charged conspiracy (from April 2008 to June 2011), Xiang Li engaged in over 500 transactions, in which he distributed approximately 550 different copyrighted software titles to at least 325 purchasers located in at least 28 states and over 60 foreign countries.  These software products were owned by approximately 200 different manufacturers and were worth over $100 million.  The software is used in a wide range of applications including defense, engineering, manufacturing, space exploration, aerospace simulation and design, mathematics, and explosive simulation.

More than one-third of the unlawful purchases were made by individuals within the United States, including small business owners, government contractors, students, inventors, and engineers.  Some of Xiang Li’s biggest American customers held significant engineering positions with government agencies and government contractors.  For instance, Xiang Li sold twelve cracked software programs worth over $1.2 million to Cosburn Wedderburn, who was then a NASA electronics engineer working at NASA’s Goddard Space Flight Center, in Greenbelt, Maryland.  Xiang Li also sold ten cracked software programs worth over $600,000 to Dr. Wronald Best, who held the position of “Chief Scientist” at a Kentucky-based government contractor that services the U.S. and foreign militaries and law enforcement with a variety of applications such as radio transmissions, radar usage, microwave technology, and vacuum tubes used in military helicopters.  Both Wedderburn and Best have pled guilty to conspiracy to commit criminal copyright infringement and are awaiting sentencing in the District of Delaware.   

Between January 2010 and June 2011, undercover agents made a series of purchases of pirated software worth hundreds of thousands of dollars from Xiang Li’s CRACK99 website.  The investigation culminated in a face-to-face meeting between Xiang Li and undercover agents on the Island of Saipan, in June 2011.  Xiang Li agreed to travel from China to Saipan to deliver pirated software, design packaging, and 20 gigabytes of proprietary data from a U.S. software company to undercover agents posing as U.S. businessmen.  In addition, Xiang Li and the undercover agents were meeting to discuss a plan to distribute pirated software to small businesses in the United States.  The undercover agents arrested Xiang Li on June 7, 2011, after he delivered the stolen intellectual property to them at a Saipan hotel.  Xiang Li was transported to the District of Delaware, where he has remained in custody since June 2011.

One of the companies victimized by software piracy scheme stated, “Circumventing our commercial aerospace and defense software license mechanisms not only harms the competitiveness of our company, but also U.S. national security interests. In addition to the revenue lost, we spend significant legal resources obtaining patents and trademarks to protect our intellectual property.  We also invest a lot of energy administering software license agreements and product-based, end-user licenses, which are key components of our U.S. export control compliance and customer support programs.”

This case is being investigated by the United States Department of Homeland Security, Homeland Security Investigations, and the Defense Criminal Investigative Service.  This case is being prosecuted by Assistant United States Attorneys David L. Hall and Edward J. McAndrew.