FTC Halts, Fines Spyware Operation

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WASHINGTON -- A U.S. District Court judge has ordered a spyware operation to give up more than $4 million in profit after the U.S. Federal Trade Commission filed a lawsuit against the company.

The FTC accused the company and an affiliate of deceptively downloading spyware onto computers, changing the computers' settings, and hijacking their search engines.

In a separate case, another company, accused of "stealthy" download practices, has been barred from collecting consumers' personal information pending trial, the FTC said this week.

The FTC sued both operations, charging that the stealthy downloads of spyware were unfair and deceptive and violated federal law. The two companies used different techniques to direct consumers to their Web sites and start the downloads, but the FTC accused both operations of taking over computers without the owners' approval, secretly changing their settings and barraging the owners with pop-up ads. The spyware and other software the defendants installed caused many computers to slow down or crash, the FTC said.

IE Vulnerability Exploited

The FTC accused Sanford Wallace and his company, Smartbot.Net, of exploiting a vulnerability in Microsoft's Internet Explorer Web browser in order to distribute spyware.

The spyware caused the CD-ROM tray on computers to open and then issued 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! Download Spy Wiper NOW!"

Spy Wiper and Spy Deleter, the purported antispyware products the company promoted, sold for $30.

A default judgment against Wallace and Smartbot.Net orders them to give up nearly $4.1 million in profit from the spyware operation.

The order, issued by the U.S. District Court in New Hampshire, also bars Wallace and his company from:

-- Downloading spyware and any software onto consumers' computers without consent;

-- Redirecting consumers' computers to sites or servers other than those the consumers selected to visit;

-- Changing any Web browser's default home page.

A settlement with defendants OptinTrade and Jared Lansky prohibits the same practices. Lansky, an ad broker who distributed ads containing Wallace's spyware, will give up $227,000 in spyware-related profits.

Second Case

In a second case, the FTC charged that Odysseus Marketing and its owner, Walter Rines, lured consumers to their Web site by advertising bogus software they claimed would allow consumers to engage in anonymous peer-to-peer file sharing.

The spyware and other software bundled with it hijacked search engines and reformatted search engine results, placing Rines' clients first, the FTC said. Rines also distributed spyware by exploiting security vulnerabilities in Internet Explorer and other applications, and the spyware captured consumers' personal information, including their names, addresses, e-mail addresses and information about their online transactions.

That personal information was transmitted to defendants' Internet servers, where they compiled the information into a database in order to sell access to the data, the FTC said.

A preliminary injunction, also issued by the New Hampshire court, bars Odysseus and Rines from downloading spyware without consumers' consent, and from disclosing, using or further obtaining consumers' personal information, pending trial. The FTC will ask the court to order a permanent halt to their activities and order them to give up their gains.

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