FTC Wins Round Against ‘Spyware’ King

A New Hampshire man accused in the Federal Trade Commission’s (FTC) first spyware case has agreed to stop secretly installing adware, spyware and other unsolicited software programs on users’ computers until the FTC’s suit against the company is resolved.

The deal, ordered by a New Hampshire federal district court in December but not publicized by the FTC until today, makes permanent the October
preliminary injunction the FTC won against Sanford Wallace, who was known as a notorious
spammer in the 1990’s.

“Basically, he agreed to stop dropping code on servers and Web sites,” Laura
Sullivan, the FTC lawyer handling the case, told internetnews.com. “Nor is he allowed to
publish any such code. This is great relief for consumers.”

In its complaint against the company, the FTC contends Wallace and his companies — SmartBot.net and Seismic Entertainment Productions — engaged in unfair and deceptive trade practices by installing software on users’ computers without their consent. Once installed, the programs changed Web browser settings, tracked user movements over the Internet and generated pop-up ads.

The FTC also claims SmartBot and Seismic used the pop-ups to sell software that removed the spyware installed by the two companies.

Sullivan said by agreeing to the stipulated preliminary injunction order,
Wallace avoided a preliminary hearing scheduled for today. No trial date has
been set for the case. According to the local New Hampshire newspapers,
Wallace has maintained his innocence and claims the government is harassing
him for his former spamming activities.

“This [order] protects consumers going forward and we were able to do so
quickly,” Sullivan said.

In addition to being the FTC’s first spyware case, the litigation has
particular significance for the agency since it claims no new federal laws
are needed to prosecute spyware purveyors. Last year, against the FTC’s advice, the
U.S. House of Representatives passed two
anti-spyware bills but the legislation failed to gain traction in the

According to the FTC’s October complaint, the unsolicited software installed
by Wallace’s companies resulted in crashing a number of users’ computers.

“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 FTC further claims Wallace’s software also redirected 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.

Efforts to reach Wallace for comment were not successful by presstime. Foster’s Daily Democrat, a New Hampshire-based newspaper, reported that Wallace has “denied any wrongdoing and has said he is being targeted by the government” because of his past history as a spammer.

Wikipedia, the online dictionary, has a detailed listing of Wallace’s history with online marketing.

Updates prior version to clarify spelling of Wallace’s name

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