Ever since ad-supported music service SpiralFrog shut its doors in March, former users have complained about receiving a glut of spam.
"SpiralFrog seems to have sold their members' e-mail (addresses) to spammers," a CNET reader commented in response to a May story about some of the company's struggles. "I signed up for the service with a unique e-mail address. As soon as the service shut down, I started getting massive amounts of spam sent to that address. Anyone else have this problem? Pretty slimy."
It's still unclear how many spammers obtained a list of e-mail addresses belonging to about 2.5 million registered users of the now-defunct service, as well as how they all obtained the addresses. But it is clear that at least one company obtained the e-mails by paying a former SpiralFrog salesman $8,500, CNET News has learned.
SpiralFrog CEO Joe Mohen authorized former employee Tim Bieber to sell customer e-mails with no privacy restrictions. Bieber's address has been redacted from this document.
(Credit: Greg Sandoval/CNET)A review of SpiralFrog's documents provided by a start-up that purchased the e-mail list shows that SpiralFrog's founder and CEO, Joe Mohen, authorized the sale days before creditors took control of the company's assets on March 13, 2009. Leading up to the sale, Mohen gave the list to Tim Bieber, a former SpiralFrog salesman, as compensation for back wages the company owed him, records show. Mohen did this despite SpiralFrog's promise to protect users' privacy.
"SpiralFrog will not share, sell, or trade personally identifiable information collected at the site with third parties, except as described in this privacy policy," the company said in its privacy agreement. "On a confidential basis only, SpiralFrog may share personally identifiable information collected at the site with corporate affiliates, consultants, or third parties performing a specific service or function on our behalf."
Documents show the sale of the addresses had nothing to do with a company working on SpiralFrog's behalf. Indeed, the sale took place weeks after the music service shut down. Mohen acknowledged to CNET News that there wasn't anything in his agreement with Bieber to prevent the former salesman from selling the list as many times as he wanted, to whomever he wanted. Bieber did not respond to numerous interview requests.
"The users who signed up with SpiralFrog were given the clear impression that their e-mail addresses would not end up in the hands of spammers," according to a former SpiralFrog employee with knowledge of the sale, who spoke on condition of anonymity. "Companies routinely promise to protect privacy and very rarely break it. SpiralFrog kept its promise until the day before shutting down."
In 2000, Arizona Sen. John McCain called for legislation that would prevent bankrupt Web stores from selling their customers' personal information without their knowledge.
(Credit: Greg Sandoval/CNET Networks)In two interviews with CNET, Mohen acknowledged that in March, he "licensed" the user data. Mohen told CNET in June that to the "best of my recollection," the licensing deals complied with SpiralFrog's privacy agreement. Last week, however, Mohen said the agreement he had with Bieber, based in Vancouver, British Columbia, did not go far enough to protect customer privacy.
"In retrospect, I should have added tighter language to that agreement," Mohen said a week ago. "In the later days of the company, Tim Bieber was owed money by the company, and I struck an agreement with Tim to avoid litigation. To satisfy the liability, I licensed to Tim the user database."
Plenty of consumers suspect retailers of secretly sharing their information, but because of the shadowy way in which spammers conduct their business, tracking down the responsible party is nearly impossible. And once an e-mail list falls into the hands of spammers, it can be sold and resold.
Internet users often go to great lengths to protect their e-mail addresses from spammers. The history of the Web, however, shows that for dying start-ups, the temptation is to look upon the data as just another asset to be liquidated. The situation at SpiralFrog is similar to one that occurred when the dot-com bubble burst in 2000.
Nine years ago, CNET News reported that three dot-com failures, including Disney-backed Web store Toysmart.com, tried to auction off customer data the companies once promised never to share, such as credit card data and phone numbers. Members of Congress, including Arizona Sen. John McCain, argued that bankruptcy didn't give companies the right to break promises to consumers.
The Federal Trade Commission sued Toysmart and eventually blocked the sale. As part of a settlement, Disney agreed to purchase Toysmart's customer information for $50,000 and then destroy it.
Authorizing the sale
The sale of SpiralFrog's user data began sometime around March 27, when Bieber approached executives at the start-up that purchased the list, according to that company's attorney.
The start-up's lawyer, who has asked to remain anonymous, said that after wiring $8,500 to Bieber on March 31 to obtain the user e-mail list, the company has not shared or sold SpiralFrog's user information with anyone, and it has obeyed all laws in acquiring the list. To prove his point, the attorney said that when Bieber first approached the start-up about selling SpiralFrog's user addresses, executives there wanted proof that he was authorized to sell the list.
That wasn't a problem. Bieber had asked Mohen for written authorization two weeks earlier, documents show.
"Joe, I'll be needing something simple in writing from you authorizing me to (be) selling this database as part of remuneration," Bieber wrote in an e-mail dated March 12, the day before creditors took control of SpiralFrog. "So far, the list is useless without some paper authorizing its resale--even loose paper explaining the nature of how I came across the list...You dig. Let me know ASAP."
Click the image above to read our story on how a fractured management hurt SpiralFrog
Mohen then gave him rights to use the list "for commercial purposes on a nonexclusive basis" for six months. Bieber forwarded the document to the start-up that purchased the list. In addition, the start-up's executives met in New York with Mohen, who confirmed that Bieber had the right to sell the list, the start-up's attorney said.
It is unclear whether Bieber distributed the list to anyone else.
Mohen said SpiralFrog had stopped paying employees sometime in November 2008 and that Bieber had worked for an extended period without receiving compensation. On February 26, 2009, Bieber wrote Mohen that he was prepared to take legal action, if he wasn't paid.
"Joe, hope (you) got good news from your conference call last night. I file a lawsuit next week naming (SpiralFrog) and 3V (the hedge fund that loaned SpiralFrog money for nearly two years), unless you provide me with funds and a payment schedule by end of week...I'm hanging by (the) ends of my fingernails."
Editors' note: Go here to read some copies of SpiralFrog's correspondence.
John Palfrey, one of Harvard's leading thinkers on the Internet, has recently finished a study on kids raised in the digital age. He now has a few tips to share about Web porn, online piracy, and Sen. John McCain's lack of tech know-how.
Palfrey, a Harvard law professor and director of the school's Berkman Center for Internet & Society, visited CNET's headquarters on Tuesday to discuss the findings of a recent study of a group he calls "digital natives." These are people who don't know life before cell phones, computers, and the Internet.
Palfrey, who wrote a book about the study called Born Digital, was fairly upbeat about the Web's affects on young people. That's not going to surprise too many people as Palfrey is a recognized Internet booster. But after completing 100 "in-depth interviews" with young people, ages 13 to 22, Palfrey sees some possible solutions to problems confronting Web-connected youth.
Turn young pirates into content owners
Kids steal music, according to Palfrey's study. "It's plain that virtually every young person we talked to gets music exactly the same way, which is they are downloading from an Internet site. The vast majority are downloading it illegally from a file-sharing site. A very small number are downloading and paying for it."
Palfrey found that the music industry isn't popular with young people and they believe they're "sticking it to the man" when they pirate music. Their attitudes changed when they perceived themselves to be doing harm to some other person.
"I'm completely convinced that the answer in the long-term sense is to encourage kids to be in the posture of a creator themselves," Palfrey said. "You get kids to say 'What is it like to take some content from somebody else? Once they get in a posture of being an artist, which so many kids are on a daily basis in some respects, I think there is great promise in their willingness to empathize with creators when they are creators themselves."
Efforts by the Motion Picture Association of America and Recording Industry Association of America to educate young people, which were largely just-say-no strategies, have thus far been ineffective, Palfrey said, adding that he's created a curriculum to foster this empathy in art, civics or music classes.
He had some tips to the news media about teens and young people. His study revealed what people already knew; they aren't reading The New York Times or watching broadcast TV news but they are still interested in being informed.
Teens are divided into three categories, Palfrey said. The first group likes to scan headlines and links. The second will click on the links and read full stories, and the third category will read stories and post comments or blog about it. Palfrey said that those media companies that are engaging readers by allowing them to post comments and feedback will fare better than those that don't.
Parents should get in the game
Porn and violence are available to youth more than ever thanks to digital technology, Palfrey said. This is very scary to parents, and he acknowledges that in many ways they should be concerned.
""I tell parents to get in the game," Palfrey said. "To the extent that you're not familiar with the technologies, it's about making that first step. Let your student be the guide. They will happily show you their friends' MySpace page or what a blog is. Making that first connection when you are then in the conversation opens up so many possibilities. Too many parents just say 'I don't get this' and are pretending it's not happening or not participating at all. I think this is very destructive over the long term."
How can you lead a country without e-mail?
During the talk with the audience at CNET, Palfrey was asked about statements made by McCain, the Republic presidential hopeful. McCain has said that he doesn't know how to get online. Palfrey responded that he didn't wish to make a political statement but that he didn't know how anyone lacking a rudimentary grasp of the Web and technology can lead this country effectively--not when cyberwarfare, surveillance, and security are so grounded in tech.
Palfrey called McCain's lack of Web knowledge "pathetic."
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