Markets Wired

An operator of an online “scareware” scheme will pay more than $8 million to settle Federal Trade Commission charges that he used deceptive ads to trick consumers into thinking their computers were infected with malicious software, and then sold them software to “fix” their non-existent problem.

As part of the FTC’s ongoing efforts to protect consumers from online scams, the agency cracked down on the scareware operation, filing a complaint against seven defendants who allegedly operated the scheme in 2008. The agency charged that the defendants did business using the company names Innovative Marketing, Inc. and ByteHosting Internet Services, LLC, operated using a variety of aliases, and maintained offices in various countries.

The defendant whose settlement was announced today will be required to turn over $8 million in ill-gotten gains so it can be used to reimburse victims of the scam and will be barred from the deceptive practices

In December 2008, at the request of the FTC, a U.S. district court ordered a halt to the massive scheme. According to the FTC’s complaint, the defendants falsely claimed that scans had detected viruses, spyware, and illegal pornography on consumers’ computers. The FTC alleged that the defendants conned more than one million consumers into buying their software products such as Winfixer, Drive Cleaner and Antivirus XP to remove the malware the bogus scans had supposedly detected.

The FTC charged that the defendants used elaborate and technologically sophisticated Internet advertisements that they placed with advertising networks and many popular commercial websites. These ads displayed to consumers a “system scan” that invariably detected a host of malicious or otherwise dangerous files and programs on consumers’ computers. The bogus “scans” would then urge consumers to buy the defendants’ software for $40 to $60 to clean off the malware.

Under the proposed settlement order, Marc D’Souza and his father, Maurice D’Souza,
will give up $8.2 million in ill-gotten gains. The FTC alleged that Marc D’Souza was one of the key defendants behind the scam. It charged Maurice D’Souza as a relief defendant who did not participate in the scam, but allegedly profited from it. The order bans Marc D’Souza from any involvement with software that interferes with consumers’ computers. It also bars him from:

• making deceptive claims in connection with computer security software;
• using domain names registered with false information; and
• misrepresenting that he is authorized to act on behalf of third parties.

The FTC wishes to thank the Canadian Competition Bureau for its invaluable assistance in this matter.

The Commission vote to accept the proposed settlement was 5-0. The settlement was filed in the U.S. District Court for the District of Maryland. Two other defendants – one individual and one company – previously settled the charges against them. The FTC obtained default judgments against three other defendants. Litigation will continue against the sole remaining defendant in the case, Kristy Ross.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated final orders have 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 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

(FTC File No. X090017)