RealTime IT News

Spyware Hustler Hit With $4M Penalty

Justice was finally downloaded Thursday on Sanford Wallace, a notorious spammer of the 1990s who moved on to illegal spyware operations that installed adware, spyware and other unsolicited software programs on users' computers.

A New Hampshire federal district court ordered Wallace and his company, Smartbot.Net, to pay more than $4 million in restitution, and it permanently barred Wallace from downloading any software to consumers 'computer without the users' consent.

In a related action against OptinTrade and Jared Lansky, the court ordered a halt to the same practices that are barred in the Wallace and Smartbot.Net judgment.

Lansky, an ad broker who distributed ads containing Wallace's spyware, will pay $227,000 in restitution.

Wallace was at the center of the Federal Trade Commission's (FTC) first spyware case in October 2004.

The FTC sued both Wallace and Lansky, claiming that their secret downloads of spyware were unfair, deceptive and violated federal law.

Although Wallace and Lansky used different techniques to direct customers to their sites, the FTC alleged that both operations hijacked consumers' computers without their knowledge or approval, secretly changing their settings and bombarding them with pop-up ads.

After the spyware was installed without consent, users' were informed that their machines were infected and therefore needed anti-spyware software.

Spy Wiper and Spy Deleter, the purported anti-spyware products the defendants promoted, sold for $30.

In an unrelated case, the FTC also announced it was charging Odysseus Marketing and its principal, Walter Rines, with luring consumers to their Web site by advertising bogus software they claimed would allow consumers to engage in anonymous peer-to-peer (P2P) file sharing.

According to the FTC, the spyware and other software bundled with it hijacked search engines and reformatted search engine results, placing Rines's clients first.

The FTC charged that Rines and Odysseus distributed their spyware by exploiting security vulnerabilities in Microsoft's Internet Explorer.

The FTC claims that Rines and Odysseus captured consumers' personal information, including their names, addresses, e-mail addresses, telephone numbers, Internet browsing and shopping history and information about their online transactions.

According to the FTC complaint, once the data was captured, the information was sent to Odysseus' servers to be compiled into a database. The FTC claims Odysseus and Rines attempted to sell the stolen data.