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'Spamford' Wallace fined $4m over spyware biz

FTC cracks down on rogue operations

Internet Security Threat Report 2014

Sanford 'Spamford' Wallace has been fined $4m and ordered to restrict the deceptive spyware practices of his company, Smartbot.Net, after losing a lawsuit brought by the US Federal Trade Commission.

The FTC alleged that Wallace's software takes advantage of well-known IE vulnerabilities to infiltrate PC and secretly change user's settings and hijack their search engines, before serving up a barrage of pop-up ads. The ads try to bully users into buying anti-spyware products, Spy Wiper or Spy Deleter, for $30 a throw. Worse still, the products fail to clean up systems, the FTC says.

A default judgment against Wallace and Smartbot.Net orders them to give up $4m of their ill-gotten gains. The order also bars Wallace and Smartbot.Net from downloading spyware onto consumers' computers or distributing software that changes users PC settings without their consent. Jared Lansky, an ad broker who disseminated ads containing Wallace’s spyware via OptinTrade, was fined $227,000 in the same judgement.

The case against Wallace represents the first federal prosecution of a spyware case, although individual states such as Utah have targeted alleged spyware operations. Wallace claims he is being targeted because of his past as a notorious bulk mailer. His firm Cyber Promotions sent millions of spam emails a day before lawsuits from AOL and Compuserve prompted Wallace to leave the company and "abandon spamming".

In a second case, the FTC obtained a revised court injunction against Odysseus Marketing and its principal, Walter Rines, over their alleged spyware downloads. Odysseus Marketing alleged tricked users into downloading a software bundle containing spyware components via promises that it would allow consumers to engage in anonymous peer-to-peer file sharing. According to the FTC, the spyware package actually hijacked search engines and reformatted search engine results, placing Rines’ clients first.

The FTC recently amended its complaint, charging that the defendants exploit security vulnerabilities to distribute spyware that captured consumers’ personal information. this data - including their names, addresses, email addresses, telephone numbers, internet browsing and shopping history - was allegedly uploaded onto the net from compromised machines and sold by Odysseus. The revised injunction bans the defendants from downloading spyware without consumers’ consent, and from disclosing, using, or further obtaining consumers’ personal information, pending trial. ®

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