Court orders spam network to pay $15.2M

IDG News Service - A U.S. district court judge has ordered the largest "spam gang" in the world to pay nearly $15.2 million for sending unsolicited e-mail messages marketing male-enhancement pills, prescription drugs and weight-loss supplements, the U.S. Federal Trade Commission said Monday.

Spamhaus, the antispam organization, called the e-mail marketing network the "No. 1 worst spam gang" on the Internet for much of 2007 and 2008.

Australian resident Lance Atkinson, the spam ring's leader, has paid more than $80,000 to New Zealand authorities after confirming his involvement in the spam network, and accomplice Jody Smith, a U.S. resident, has agreed to an order that he turn over nearly all his assets to the FTC, the agency said.

In October 2008, a judge in the U.S. District Court for the Northern District of Illinois, Eastern Division, ordered an asset freeze and a halt to the network's operation, which generated more than 3 million complaints to law enforcement authorities, the FTC said.

Earlier this month, the court issued a default judgment against Atkinson, his company, and three companies affiliated with Smith. In addition to the $15.2 million that Atkinson and his company have been ordered to pay, the three companies affiliated with Smith are liable for nearly $3.8 million.

Atkinson and Smith recruited spammers from around the world, according to the FTC’s complaint, filed last year. Those spammers sent billions of e-mail messages directing consumers to Web sites operated by an affiliate program called Affking, according to the complaint. The spammers used false header information to hide the origin of the messages and failed to provide an opt-out link or list a physical postal address, violations of the U.S. CAN-SPAM Act, the FTC said.

The spam network, using the Canadian Healthcare brand name and other labels, marketed a male-enhancement pill, prescription drugs and a weight-loss pill, the FTC said. The e-mail messages falsely claimed that the medications came from a U.S.-licensed pharmacy that dispenses U.S. Federal Food and Drug Administration-approved generic drugs.

The defendants did not operate a pharmacy licensed in the U.S., the FTC said. The drugs they sold were shipped from India and had not been approved by the FDA, the agency.

The FTC alleged that Atkinson and Smith made false claims about the security of consumers’ credit card information and other personal data consumers provided when they bought goods. The defendants’ Web site assured potential consumers that the pharmacy "treats your personal information (including credit card data) with the highest level of security.”

The Web site went on to describe its encryption process, which supposedly involved “Secure Socket Layer (SSL) technology.” However, there was no indication that consumers’ information was encrypted using SSL technology.

To settle FTC charges that he helped send spam e-mails to millions of consumers, Smith will turn over nearly all his assets. Under the terms of the settlement, Smith will pay approximately $212,000. He also will assign any rights he has to $91,000 frozen in the name of one of his co-defendants, and $547,000 that may be held for his benefit in an Israeli bank.

Smith pled guilty in August to the criminal charge of conspiracy to traffic counterfeit goods, and faces up to five years in prison. He is scheduled to be sentenced in December in U.S. District Court for the Eastern District of Missouri.