CHARLESTON, S.C. (WCBD) – A Charleston tech company and its chief executive officer have pleaded guilty to twenty counts of wire fraud.
Acting United States Attorney for the District of South Carolina, M. Rhett DeHart, said the defendants, Micfo, LLC and CEO Amir Golestan, 38, delivered the plea mid-way through a federal trial.
It came after evidence showed Golestan created “fictitious persons and companies to sell fraudulently obtained interest address rights for millions of dollars,” according to DeHart.
Golestan started Micro in Charleston in 1999; the company represented itself as providing web hosting and other Internet-based services.
But evidence in court revealed that from February 2014 until the federal indictment in this case in May 2019, Golestan, as CEO of Micfo, created ten separate and fictitious companies which he referred to as “Channel Partners.”
The purpose of these Channel Partners was to obtain address rights to Internet Protocol (IP) version 4 addresses (IPv4) from ARIN.
According to DeHart’s office, IPv4 addresses are numerical labels assigned to each device connected to a computer network that uses the Internet for communication.
ARIN is a nonprofit organization that administers IP address rights, allocations, and transfers in the United States, Canada, and parts of the Caribbean. To obtain an IP address allocation from ARIN, per its policies, an entity must provide a need-based justification. ARIN’s pool of IPv4 addresses has been depleted so there has been an increasing demand, which has resulted in a secondary market where prices for a single IPv4 address have increased dramatically.
DeHart said Golestan created the fictitious Channel Partners, which would sometimes include creating web pages and fictional employees, to make the companies look legitimate and meet ARIN’s need-based justification policies for allocation of IPv4 addresses.
Using the fake companies, Golestan was granted the rights to hundreds of thousands of IPv4 addresses from ARIN worth tens of millions of dollars. “Once Golestan had fraudulently obtained the IPv4 address rights, he began to sell those rights for millions of dollars,” said DeHart.
“As a result of his fraudulent scheme, Golestan pocketed approximately $3.5 million dollars, with another $6.2 million dollars waiting in escrow that would have gone to Golestan had he not been caught,” explained DeHart. “Although Golestan and his company initially went to trial, after two days and testimony from eight Government witnesses, both Micfo and Golestan pleaded guilty to all twenty counts of wire fraud without a plea agreement.”
“Like many corporate fraud criminals often do, Golestan made the mistake of assuming his scheme would not be discovered,” said Susan Ferensic, Special Agent in Charge of the FBI Columbia Field Office. “Make no mistake, the FBI along with our local, state, and federal partners, will work nonstop to uncover and pursue charges for criminals who adversely affect our Internet infrastructure.”
Golestan faces of maximum penalty under each count of 20 years in federal prison, a fine of $250,000, 3 years of supervision to follow the term of imprisonment, and restitution.
Micfo, the company, faces a maximum fine under each count of $500,000.