Spyware Operators Settles With FTC

Two notorious spyware operators settled charges Tuesday with the Federal Trade Commission (FTC).

Both John Robert Martinson, the principal owner of Mailwiper, and Odysseus Marketing and its principal, Walter Rines, drew the FTC’s attention for their secret downloads lurking behind free downloads of screensavers, anti-spyware and peer-to-peer (P2P) software.

The settlement imposes a $1.86 million fine on Martinson and Mailwiper, although all but $40,000 is suspended because of their inability to pay. Odysseus and Rines agreed to pay a $1.75 million fine with only $10,000 due because of their financial situation.

Should the court find that any of the defendants misrepresented their financial condition, the entire fine will become due.

The settlements also require the defendants to obtain consumers’ express consent before downloading any software onto their computers. In addition, the settlement bars them from installing software that cannot be readily uninstalled.

Martinson and Rines are also required to monitor the affiliates they hire to promote or distribute software programs, products or services for compliance with the FTC orders.

The settlements follow a deal Zango, the former 180soultions, cut with the FTC earlier this month. The controversial adware distributor agreed to $3 million in restitution and a ban onb downloading software without consumers’ express consent.

Martinson, in particular, earned consumer ire by installing spyware on computers that forced pop-ups informing users their machines were infected with spyware. To remove it, consumers were compelled to spend $30 for Martinson’s Mailwiper and its successor, Spy Deleter, which, in turn, continued to operate as spyware.

One advertisement, for example, caused the CD-ROM tray on computers to open and then displayed a “FINAL WARNING!!” to computer screens with a message that said, “If your cd-rom drive’s open . . .You DESPERATELY NEED to rid your system of spyware pop-ups IMMEDIATELY!”

According to the FTC, Martinson and his companies paid spyware distributor Sanford Wallace and his companies, Seismic Entertainment and SmartBot.Net, to promote, advertise and sell the Spy Wiper and Spy Deleter programs.

Wallace and his companies exploited security vulnerabilities in Microsoft’s Internet Explorer Web browser and downloaded Martinson’s spyware onto consumers’ computers.

In May, Wallace, an infamous spammer of the 1990s, was ordered by the court to pay more than $4 million in restitution. He is also permanently barred from downloading any software to consumers’ computers without the users’ consent.

The settlement announced Tuesday bars Martinson from exploiting any security vulnerability to download or install software. It also prohibits him from redirecting consumers’ computers to sites or servers other than those consumers choose to visit.

Martinson is also prohibited from changing any Web browser’s default home page and from modifying or replacing the search features or functions of any search engine.

The FTC charged Rines and Odysseus Marketing with advertising bogus free software, including a program called Kazanon that purportedly allowed consumers to engage in P2P file sharing.

According to the FTC, the software captured consumers’ personal information, Internet browsing patterns and shopping histories and transmitted that information to the Rines’ Internet servers.

The settlement requires Rines to obtain a $500,000 performance bond before downloading or installing any software that displays ads.

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