FTC wilts mega "male enhancement" spam operation

The Federal Trade Commission today got a US district court to shut down what the agency called a vast international spam network that sold prescription drugs and bogus male-enhancement products.

The network has been identified as the largest "spam gang" in the world by the anti-spam organization Spamhaus. The FTC said it had received more than three million complaints about spam messages connected to this operation, and estimates that it may be responsible for sending billions of illegal spam messages. According to papers filed with the court, the defendants deceptively marketed a variety of products through spam messages, including a male-enhancement pill, prescription drugs, and a weight-loss pill.

The FTC said the defendants include- Lance Atkinson, a New Zealand citizen living in Australia, and Jody Smith of Texas - and four companies they control: Inet Ventures Pty Ltd., Tango Pay Inc., Click Fusion Inc., and TwoBucks Trading Limited. The FTC's complaint alleges that both Atkinson and Smith are liable for the spamming. It holds Atkinson responsible for all product claims, and Smith liable for claims made for the pharmaceutical products. In June 2005, the FTC obtained a $2.2 million judgment against Atkinson and another business partner for running a similar spam affiliate program that marketed herbal products.

According to court  papers, the defendants recruited spammers around the world to send billions of spam messages directing consumers to Web sites operated by an affiliate program called "Affking." By using false header information to hide the origin of the messages, failing to provide an opt-out link, and failing to list a physical postal address, the defendants violated the CAN-SPAM act.

According to the FTC some security researchers believe that at one time, nearly one-third of the world's spam e-mail came from a network of compromised computers, or a  botnet, that sent spam promoting the defendants' Web sites. Their enterprise included participants in Australia, New Zealand, China, India, Russia, Canada, and the United States, the FTC said.

One product called "VPXL" was touted as an herbal male-enhancement pill. Advertised as "100% herbal and safe," it supposedly caused a permanent increase in the size of a user's penis. The agency alleged that not only did the pills not work, but they were neither "100% herbal" nor "safe," because they contained sildenafil - the active ingredient in Viagra, the FTC said.

The defendants also used spam e-mail to sell prescription drugs. They claimed that the medications came from a bona fide, US-licensed pharmacy that dispenses FDA-approved generic versions of drugs such as Levitra, Avodart, Cialis, Propecia, Viagra, Lipitor, Celebrex, and Zoloft. In fact, the defendants do not operate a US-licensed pharmacy. They sell drugs that are shipped from India, the FTC said.

In addition, the FTC alleges the defendants made false claims about the security of consumers' credit card information and the other data they were required to provide to buy goods. In operating the online pharmacy, which was called "Target Pharmacy" and later "Canadian Healthcare," the defendants' Web site assured potential consumers that the pharmacy treated personal information (including credit card data) with the highest level of security," according to papers filed with the court. The Web site went on to describe its encryption process, which supposedly involved Secure Socket Layer (SSL).

The FTC said the court has issued a temporary injunction prohibiting defendants from spamming and making false product claims, and has frozen the defendants' assets to preserve them for consumer redress pending trial. Authorities in New Zealand also have taken legal action, working in tandem with the FTC.

According to a recent Network World article by my colleague Carolyn Marsan, the number of spam messages sent over the Internet every day has grown more than 10-fold, topping 164 billion worldwide in August 2008. Almost 97% of all e-mails are spam, costing U.S. ISPs and corporations an estimated $42 billion a year.   Law enforcement officials have prosecuted dozens of spammers under the CAN-SPAM Act and won some high-profile cases, such as putting pharmacy spam king "Rizler" behind bars for 30 years and awarding MySpace damages of $234 million from two spammers.

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