FTC halts domain-name registration scam

A U.S. judge orders Canadian operation to stop sending false invoices to small businesses and other organizations

A U.S. judge has ordered a halt to a Canadian operation that allegedly posed as a domain-name registrar in an effort to collect fees from thousands of U.S. consumers, small businesses and nonprofits, the U.S. Federal Trade Commission said.

Judge Robert Dow Jr. of the U.S. District Court for the Northern District of Illinois, Eastern Division, has ordered defendant Steven Dale to pay nearly US$4.3 million in a default judgment the FTC released Monday. Dow issued a settlement order for a Toronto business and three other individuals in the lawsuit brought by the FTC in May 2008, the agency announced.

Dow issued the settlement order and default judgment in March, but the documents were made public Monday.

The FTC had accused a business called 1646153 Ontario of sending fake domain-name invoices to small businesses and other organizations, with the letters listing the existing domain name of the targeted firm's website or a slight variation on the domain name, such as substituting.org for .com. The invoices appeared to come from the targeted organizations' existing domain-name registrars and instructed them to pay for an annual "website address listing."

The invoices also listed search engine optimization as part of the service from 1646153 Ontario, which did business under several names, including Internet Listing Service.

The invoices led the targeted customers to believe they had to pay the fees to maintain their domain-name registrations, the FTC said in a press release. Other customers paid the invoices based on the claim that the search optimization service would "direct mass traffic" to their sites and that their "proven search engine listing service" would result in "a substantial increase in traffic," the FTC press release said.

Targeted customers who paid the invoices did not receive domain-name registration services, and the search optimization service did not produce additional traffic for their websites, the FTC said in its complaint.

Dow issued a temporary restraining order against several of the defendants in May 2008. The settlement order and default judgment released Monday end the FTC's lawsuit.

The orders bar the defendants from misrepresenting that they have a preexisting business relationship with consumers, and that consumers owe them money. The orders also prohibit the defendants from saying they will provide domain name registration and search optimization services.

The settlement order, entered against defendants Isaac Benlolo, Kirk Mulveney, Pearl Keslassy and 1646153 Ontario, includes a suspended judgment of $4.3 million, the amount of money the defendants made through the operation. They will turn over $10,000, based on their inability to pay more, the FTC said.

Charges against Ari Balabanian and Data Business Solutions were dismissed by the court at the FTC's request.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantusG. Grant's e-mail address is grant_gross@idg.com.

Copyright © 2010 IDG Communications, Inc.

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