King of fraud

Aleksandr Zhukov once boasted he was the “King of fraud” in a 2014 text message to an associate.

A jury in Brooklyn, New York, is set to begin deliberating today whether the Russian national is actually guilty of that crime.

According to federal prosecutors, Zhukov, 41, was the ringleader of an online scam that used 1,900 servers to create fake web traffic at media sites including the New York Times that led companies like Pepsi Co. to pay inflated advertising rates.

But Zhukov, who took the stand in his own defense during his three-week trial, claims he never misled anyone and thought he was only giving advertising companies what they wanted — a way to cheaply, if artificially, boost site traffic.

“There was nothing to conceal,” Zhukov testified. “Why to lie to them if we have bot traffic? Why to lie, try to sell it as human if it’s bot? We were making business. We are not making scam or fraud.”

The case against Zhukov, who was arrested in Bulgaria in 2018 and extradited to New York the following year, is one of the first of its kind to go to trial and an example of how U.S. law enforcement is expanding its reach against alleged cybercriminals around the world.

Since Zhukov doesn’t dispute creating fake traffic, only whether it was illegal, it also offers a rare glimpse at how sophisticated spoofing campaigns generate fake page views but real profits.

Rented Servers

According to prosecutors, Zhukov and co-conspirators in Russian and Kazakhstan essentially corrupted the complex ecosystem of online advertising by using rented servers in Dallas and Amsterdam to circumvent fraud protections and simulate the online activity of millions of people viewing online ads. Those advertisers were then duped into paying for the fake views.

Zhukov, who is facing money-laundering and conspiracy charges along with fraud, personally made more than $7 million, which prosecutors say he funneled into offshore bank accounts around the world. Two other men charged with him have pleaded guilty and are awaiting sentencing. Five others remain at large.

“He was the boss, he knew what was going on in his own business, he was intimately involved in the planning and execution of this scheme each and every aspect,” Assistant U.S. Attorney Artie McConnell said in his closing arguments Monday. “His chats tell you that he’s not acting in good faith. He’s telling you he’s guilty.”

But Zhukov, who took the stand late last week, told jurors he supplied a necessary and “cheap” service to companies that act as advertising middlemen and bought his service to boost traffic and online rankings.

‘Legal Way’

Zhukov, who said he launched a business in 2014 purchasing hardware and IP addresses to create large amounts of “artificial human traffic,” acknowledged that cybercriminals often used similar techniques to maliciously infect computers.

“I thought that I can do same things but in legal way,” Zhukov said, “and for that I need to buy computers, to create my software, to buy IP addresses, combine it together and sell it as a ready product.”

He claimed he sold web traffic without criminal intent, believing his middlemen customers would sell it to other ad networks. He said he never misled customers that he was selling page views by real people.

In his closing arguments Monday, Zhukov’s lawyer, Zachary Margulis-Ohnuma, compared his client to a businessman selling water to a grocer, who then uses it to water down the milk he sells.

“You don’t go after the water seller in that analogy,” Margulis-Ohnuma said. “It’s the person who’s claiming that it’s real who is the fraudster.”

The defense lawyer said his client had been joking when he called himself the “King of fraud,” noting that in the same message Zhukov also made clear he believed he was committing no crime.

“We have a great server bot that works with low-quality traffic,” Zhukov wrote. “Advertisers know it. No cheating, no scam.”

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King of fraud