Federal, state and local government officials Tuesday announced 19 civil and criminal actions against scammers who have cheated tens of thousands of consumers out of millions of dollars.
The complaints were filed in various courts across the country by the U.S. Federal Trade Commission (FTC), in conjunction with the FBI, the U.S. Postal Inspection Service, the U.S. Securities and Exchange Commission, 10 state attorneys general and 11 other state and local agencies, according to an FTC statement.
One cyberscam targeted by the FTC involved a work-at-home envelope-stuffing opportunity. The owners of the operation, which was shut down by a federal judge, used spam and an Internet Web site to advertise the scam. They promised that in return for US$40, consumers would receive sales letters to stuff into preaddressed, prestamped envelopes at a rate of $2 per envelope.
However, the FTC said most consumers who sent their money never received any envelopes, while some received materials urging them to solicit self-addressed envelopes from third parties and forward them to the defendants in this case.
The FTC told the U.S. District Court in Chicago that these defendants probably bilked tens of thousands of consumers out of more than $2 million.
In addition to shutting down this operation, the judge froze the defendants’ assets.
The FTC said it filed another complaint against Brian Kruchten, who allegedly used the Internet to advertise so-called discount Web hosting services, such as domain name registry, Web page design and technical support, for monthly service fees of $10 to $15.
The FTC alleged that Kruchten, who did business as Page Creators, added unauthorized charges to consumers’ credit cards for supposed “excess bandwidth” use.
The FTC said a district court judge froze the defendant’s assets and appointed a receiver, pending trial.
According to the FTC, the defendant and the receiver later agreed to shut down the defendant’s Web hosting business, and the defendant has now agreed to settle the FTC charges.
Under the terms of the settlement, he and his companies are barred from billing consumers without their authorization and from obligating consumers to pay for any Internet service they did not authorize.
In addition, Kruchten is prohibited for five years from owning or controlling any business that handles consumer credit or debit card transactions, unless he first obtains a performance bond of $100,000. He is also required to pay $6,000 to the consumers he allegedly cheated, the FTC said, and he is barred from selling his customers’ personal information to any third party. The FTC said it will monitor his compliance.
Privacy advocate Jason Catlett, president of Green Brook, N.J.-based Junkbusters Corp., said that while it’s good that the FTC is following scammers into cyberspace, it is not addressing the core problem of spam cluttering cyberspace.
“The FTC should be taking a leadership position and recommending to Congress that spamming be made illegal,” he said.
FTC staff attorney Steve Wernikoff said the chairman of the FTC and the director of the FTC’s Bureau of Consumer Protection have told the agency’s attorneys to take a strong enforcement tact against deceptive spam and he said that’s what they are doing.