FTC Pursues Former Spam King in Court

The Federal Trade Commission (FTC), which opposes Congressional efforts to
pass anti-spyware legislation, filed its first spyware case
Thursday against the man once known as the undisputed king of spam and the various companies he

According to court documents filed in U.S. District Court for the District
of New Hampshire, the FTC claims Sanford Wallace, president and owner of
SmartBot.net and Seismic Entertainment Productions, is engaging in unfair
and deceptive trade acts involving spyware.

In the three-count complaint, the FTC contends SmartBot and Seismic secretly
and unfairly installs advertising and other software programs on users’
computers. Once installed, the programs change Web browser settings, track
user movements over the Internet and generate pop-up ads.

The FTC also claims SmartBot and Seismic use the pop-ups to sell software to
remove the spyware installed by the two companies. The FTC is seeking a
temporary restraining order to immediately halt the practices while the
agency pursues civil action against Wallace, Seismic and SmartBot.

The FTC is also asking the court to compel SmartBot and Seismic to remove
all programs installed on users’ computers and make restitution to those
who bought the spyware removal programs.

An FTC spokesperson said
Friday the agency would have no comment on the complaint until a Tuesday
press conference. Wallace’s telephone number is not listed.

The court had not issued a ruling on the restraining order as of midday

“Defendants download and install or have downloaded and installed software
code on computers that affects their functionality,” the FTC complaint
states. “In particular, the software code has changed the IE (Internet
Explorer) Web browser homepage on consumers’ computers, has replaced the IE
Web browser’s search engine, has displayed fake IE Web browser notepad pages
and has caused the computers’ CR-ROM trays to eject.”

The complaint states Wallace’s companies promote anti-spyware software called
Spy Wiper and Spy Deleter. Each costs $30. It says the advertising for the software
warns the consumer “that they must purchase the advertised products
immediately to resolve the specific problems that the defendants themselves
have caused.”

The defendants’ software also redirects a user’s homepage to other sites
controlled by SmartBot and Seismic.

“In numerous instances, defendants’ practices cause or have caused
consumers’ computers to malfunction, slow down, crash or cease working
properly, and cause or have caused consumers to lose data stored in their
computers,” the complaint states.

In addition, the pop-up ads served by SmartBot are also displayed when a
computer user visits other sites controlled by Seismic. SmartBot, the FTC
contends, causes a “cascade of pop-up advertisements, including full-page
advertisements, to be displayed on consumers’ computers.”

The FTC action comes after the U.S. House of Representatives passed two
anti-spyware bills with similar legislation pending in the Senate. In April,
the FTC held a spyware workshop in Washington and said the agency already
has all the authority it needs to pursue spyware purveyors.

A week later, FTC Commissioner Mozelle Thompson told Congress, “I think
targeted legislation here at this time will be very difficult, if not
impossible to define.”

House Energy and Commerce Chairman Joe Barton (R-Texas) told Thompson, “Let
me just clue you [in]. Unless I’m totally mistaken, when we get ready to
move this bill, all but a handful of the members of this committee are going
to be supportive of it.”

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