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May 04, 2006
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A settlement with defendants OptinTrade and Jared Lansky, bars the same practices that are barred in the Wallace and Smartbot.Net judgment.
Lansky, an ad broker who disseminated ads containing Wallace's spyware, will give up $227,000 in ill-gotten gains.
The FTC sued both operations charging that the stealthy downloads of spyware were unfair and deceptive and violated federal law
Although the companies used different techniques to direct consumers to their Web sites and implement the downloads, the FTC alleged that both operations hijacked consumers' computers without the consumers' knowledge or approval, secretly changed their settings, and barraged consumers with pop-up ads.
The spyware caused the CD-ROM tray on computers to open and then issued a "FINAL WARNING!!" to computer screens with a message that said, "If your cd-rom drive's open . . .You DESPERATELY NEED to rid your system of spyware pop-ups IMMEDIATELY! Spyware programmers can control your computer hardware if you failed to protect your computer right at this moment! Download Spy Wiper NOW!" Spy Wiper and Spy Deleter, purported anti-spyware products the defendants promoted, sold for $30.
The FTC first filed a lawsuit against Wallace and his SmartBOT company in October 2004; in January 2005, the federal agency announced an agreement with Wallace that banned him from distributing any software until the case was settled.
He had transitioned into the junk email business after unsolicited junk fax submissions, a business he had pioneered years before, were outlawed by the U.S. Congress. In 1995, Wallace and partner Walt Rines formed Cyber Promotions, aka Cyberpromo, entering the spam market. Thanks to an uncharacteristically shameless self-marketing campaign, Cyberpromo rapidly became the most successful seller of email marketing -- as well as the number one source of unsolicited email. Wallace's company brought a number of spam-blocking evasion tactics to the fore of the spam battle. False return addresses, relaying, and multihoming were among the questionable practices used by Cyberpromo to ensure the penetration of their advertising. Through the late 90s, Cyberpromo was sued by a number of major Internet service providers under claims that the mass of unwanted email coming solely from Cyberpromo had a detrimental effect on their operations. AOL, Compuserve, and EarthLink all received injunctions against Cyberpromo sending email to their networks. In response, Wallace announced plans in 1997 to create a backbone Internet service provider which would explicitly permit spam across its networks. As a measure of defiance, Wallace adopted the most-used name "spamford" as a domain identity for his ISP service. AGIS, Cyberpromo's primary service provider, under pressure from other backbone providers, eventually decided to pull the plug. Cyberpromo moved its operation to a new service (after winning a lawsuit against AGIS), but the spam lawsuits and growing unpopularity had already begun to take its toll. Negative publicity related to doing business with Cyberpromo took its toll on AGIS, which is now defunct. In April 1998, Wallace publicly announced that he was quitting the spam business. Cyberpromo was converted to an opt-in email marketing company and renamed GTMI. The new company was plagued by minor financial problems, as well as the spectre of its former self, with large numbers of people unconvinced of Wallace's change of heart. In 2001 Wallace was linked to a website, passthison.com, which utilized multiple-window launching to snag Web viewers, an advertising practice rarely seen outside of the online pornography industry. Wallace was also involved in another opt-in project, SmartBotPRO.NET, which is now apparently also defunct. On 2004-10-08, the FTC filed suit against Wallace and his company, SmartBOT, for infecting computers with spyware then offering a solution to remove the problem for $30. Wallace likened himself to Madonna and Howard Stern in terms of being a rebellious type, taking steps to evade the various e-mail filtering mechanisms designed to block his mailings. |
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