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Two defendants in a case involving a massive “scareware” scheme will settle Federal Trade Commission charges of deceptive advertising and forfeit more than $100,000 in assets that were frozen last year at the Commission’s request.

The two settling defendants were part of a massive deceptive advertising scheme that tricked more than a million consumers into buying “rogue” computer security products, including WinFixer, WinAntivirus, DriveCleaner, ErrorSafe, and XP Antivirus, according to the FTC’s complaint. The scheme allegedly relied on deceptive advertisements featuring bogus computer “scans” that falsely claimed to detect viruses, spyware, and illegal pornography on consumers’ computers.

The settlement imposes a judgment of nearly $1.9 million against two Cincinnati-based defendants, James Reno and ByteHosting Internet Services, LLC. This amount represents the gross revenues these two settling defendants realized from the alleged scam. Under the settlement, all but $116,697 of the judgment will be suspended based on the defendants’ inability to pay the full amount. If the defendants misrepresented their financial condition, they will be obligated to pay the full amount.

The settlement prohibits James Reno and ByteHosting from using deceptive “scareware” advertising tactics and from installing malicious programs on consumers’ computers. The settlement also permanently bars Reno and ByteHosting from ever again doing business with their co-defendants. The settlement does not affect the FTC’s ongoing case against the remaining defendants in the suit.

The Commission vote authorizing the settlement was 4-0. The settlement was filed on June 12, 2009 in the U.S. District Court for the District of Maryland, and is subject to approval by the court.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 072-3137)
(Winsoftware NR.wpd)