FTC moves to stop spyware, X-rated spamming


Published: Tuesday, January 11, 2005 at 12:44 p.m.
Last Modified: Tuesday, January 11, 2005 at 1:29 p.m.

The Federal Trade Commission has shut down six companies it accused of sending X-rated e-mails in disguise and fraudulently charging recipients who joined sexually explict Web sites in its first legal case involving pornographic Internet spam.

A federal judge on Jan. 5 granted the agency's request for a restraining order against the companies and their executives for allegedly violating federal laws governing commercial electronic mail - commonly known as spam.

The Nevada companies named in the FTC complaint were Global Net Solutions Inc., Open Space Enterprises Inc., Southlake Group Inc., and WTFRC Inc., which does business as Reflected Networks Inc.

Also named in the complaint were Global Net Vetures Ltd., of the United Kingdom and Wedlake Ltd., whose headquarters address was not listed.

Among the laws allegedly violated was the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003.

Dubbed "Can Spam," the law requires unsolicited commercial e-mail that contains sexually oriented material to include the words "SEXUALLY EXPLICIT" in the subject line.

Spammers who violate the rule face possible imprisonment and criminal fines of up to $250,000 for individuals and $500,000 for an organization.

Tracking down violators can be difficult because spammers often try to escape being directly identified by using forged return addresses or by bouncing their e-mails through unprotected relay computers on the Internet.

But there is one spammer who hasn't escaped the FTC's recent investigations into the myriad of spam e-mail and internet spyware.

Under an agreement with the Federal Trade Commission, a man known as the "Spam King" will stop infecting computers with advertising programs until a federal lawsuit against him is resolved.

Sanford Wallace and his companies, SmartBot.net Inc. of Richboro, Pa., and Seismic Entertainment Productions Inc. of Rochester, are required by the agreement to send online ads only to people who visit their Web sites.

The government says Wallace used spyware to infiltrate computers, overwhelming them with ads and other programs. Then, he tried to sell programs he claimed would fix the problems. The government said the remedies do not work.

"The commission does believe this is great relief for consumers until the matter is ultimately resolved in the courts," said Laura Sullivan, a lawyer for the FTC. "This provides wonderful protection for consumers in the interim."

No trial date has been set.

Spyware programs monitor which Web sites a consumer visits and some redirect users to different sites. This can make computers extremely sluggish and often causes them to crash.

U.S. District Judge Joseph DiClerico issued a temporary restraining order against Wallace in October to prevent him from sending ads. Hearings on that order planned for this week were canceled because the agreement made them unnecessary.

Wallace has said he is being persecuted because of his past involvement in junk Internet mailings.

He headed a company called Cyber Promotions in the 1990s that sent as many as 30 million junk e-mails daily to consumers, earning him the nicknames "Spam King" and "Spamford." He left the company after lawsuits from America Online and CompuServe.

Wallace moved to Las Vegas last summer. He recently shut down a nightclub he ran in Rochester and placed Seismic Entertainment, the company that ran it, in bankruptcy.

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