October 8, 2004 10:51 AM PDT

FTC takes aim at alleged spyware distributor

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Federal Trade Commission officials have filed a lawsuit to halt an alleged spyware distributor from surreptitiously installing software on users' computers and then trying to induce them to purchase anti-spyware products, according to court documents filed Thursday.

The FTC is seeking an injunction against Sanford Wallace and his two companies, Rochester, N.H.-based Seismic Entertainment Productions and Richboro, Pa.-based Smartbot.net, according to filings in the U.S. District Court for the District of New Hampshire. The lawsuit comes on the heels of U.S. House of Representatives' approval earlier this week of the Spy Act, which is designed to do away with the most deceptive forms of spyware.

In its lawsuit, the FTC is alleging that the defendants engaged in unfair acts and practices with their marketing and distribution of software programs to consumers.

Wallace could not be immediately reached for comment, but a message posted on one of his Web sites states that he is the victim of political posturing.

Regulators allege that since December 2003, Seismic and Smartbot marketed anti-spyware software called Spy Wiper and Spy Deleter on behalf of others for $30 per product. The two companies allegedly advertised the products via pop-up ads that redirected consumers to Web sites the defendants controlled.

The defendants allegedly exploited a vulnerability in Microsoft's Internet Explorer browser, allowing them to reconfigure the computers and surreptitiously install software code without users' knowledge.

That software code would allegedly change the user's home page and modify the browser's search engine, so that when a user typed in an address, the browser would go to one of the Web sites owned by the two companies. The software also allegedly would download and install various advertising and software programs, including Favoriteman, TrojanDownloader, Clearsearch, WinFetcher, 7Search.com and VX2. This created an "incessant stream" of pop-up ads to be displayed, the lawsuit alleges.

FTC investigators claim that the defendants were able to download and install the software without triggering IE's notification message that such activity was taking place on the user's computer.

With the software installed, the defendants allegedly used a variety of means to direct users to Web sites they controlled, including default-homepage-network.com, downloads.default-hompate-network.com and passthison.com.

Once users were allegedly redirected to the Web sites, they would be hit with a flurry of pop-up ads.

"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 on their computers," the lawsuit alleges.

A message posted on default-homepage-network.com offers a response to the charges: "Statement regarding FTC action: We believe the U.S. government is attempting to enforce federal laws that have yet to be enacted. We feel this is a political move and it is being made at the expense of legal business operations.

"I am not surprised at all that my companies and I, Sanford Wallace, were picked as the 'poster boy.' I find the timing and target of this action to be extremely convenient and painfully obvious. We deny any wrongdoings and plan to pursue all legal protections, remedies and freedoms. Sanford Wallace, SmartBot.NET, Inc."

No further comment was immediately available from the company. Directory assistance in Rochester doesn't have a listing for Seismic, and directory assistance in Richboro does not have one for Smartbot.net. A message placed with the Web site administrator for a site owned by Seismic was not immediately returned.

The FTC declined to comment on the lawsuit. A press conference is scheduled for Tuesday morning.

Momentum is building in Congress to prohibit the most serious forms of spyware. Under the proposed Spy Act, which the House approved on Tuesday, companies and individuals would be prohibited from "taking control" of a computer, surreptitiously modifying a Web browser's home page, or disabling antivirus software without the proper authorization.

The Spy Act would also give the FTC power to police violations and levy fines of up to $3 million in the most serious cases. The Senate is considering a similar bill.


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New Law Not Needed.
The FTC does not need a new law to take a company to court for bad business practices that give would-be customers a difficult time with the products they are marketing. Certainly when methods are used to hook a customer without their willing participation it makes it a predatory practice that should not be tollerated.
Posted by zaznet (1138 comments )
Reply Link Flag
You mean Spamford?
<a class="jive-link-external" href="http://en.wikipedia.org/wiki/Sanford_Wallace" target="_newWindow">http://en.wikipedia.org/wiki/Sanford_Wallace</a>

Nice try.
Posted by katamari (310 comments )
Reply Link Flag
Hope someone files a class action against this jerk
If this jerk has any significant assets, I hope someone files a class action to take them away from him. There should be no doubt that actual damages were incurred by each of his victims who received his spyware.

The prospect of being sued by a million victims would probably be a better deterrent than another Federal law. But let's go ahead and explicitly outlaw computer espionage just to make sure the spammers have no leg to stand on.
Posted by landlines (54 comments )
Reply Link Flag
Spam!! Who gives a **** about spam!!
Lets be fair, spam is just electronic junk mail. For most users it's just the quantity that is the problem.

Spyware is like an advertiser flyposting your house, including the interior, then putting you under surveillance to see how you react.
Posted by (2 comments )
Link Flag
We were just hit on my son's Dell desktop. Some con company named Antivirus Action, Inc. supposedly located in London, GB. They hijack your computer and run their scan in the background. It blocks you from logging onto the internet and the only way to remove "their" program is to pay first. This is a crock, does anyone have a work around for this monster? It is showing that my files are missing due to a virus and the only way to repair them is to purchase their software. Someone please respond about the lawsuit and whether or not we can blow the hard drive and reinstall the software without any damage being sustained to the hard drive. Thank you.
Posted by Gram2Ma2 (1 comment )
Reply Link Flag

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