Sanford Wallace made his bones as one of cyberspace’s most notorious spammers. Now he may be making new bones as one of cyberspace’s more relentless spyware purveyors – and the Federal Trade Commission said October 12 that its latest action against him and his most recent operations are just step one in a coming crackdown on spyware and adware programs.
Wallace is denying any wrongdoing. "There have been several controversial stories covering spyware over the past year, and there are several companies that are actively engaged in the process," he told a newspaper. "I think I was the easiest target to go after since I have such a controversial background on the Internet."
Except that Wallace in the past year has admitted at least once, on the record, that he was looking to boost his own traffic by forcing people into passing multiple popups to get away from his PassItOn.com site – and that he would collect personal information from anyone wanting to use his site without that popup barrage.
"We don't violate anybody's privacy; everything is disclosed," Wallace told CNET in a 2003 interview. "We're giving something away for free in exchange for consumers' permission to use private information. It's no secret. Publishers Clearing House has been doing this type of thing for years."
Wrong answer, according to the FTC, which has cited comments like that in asking a federal court to close an operation of which Wallace is the suspected mastermind, following a complaint from the Center for Democracy and Technology about popup ads for Spy Wiper and Spy Deleter. That triggered an FTC probe into Seismic Entertainment, SmartBot, and Wallace, whom the FTC believes ran a number of spyware-distributing Websites since last December.
“Consumers don’t deserve to be pestered and spied on by people who illegally hijack their computers,” said Lydia Parnes, the FTC Bureau of Consumer Protection’s acting director. “We’re putting purveyors of spyware on notice: This is our first spyware case, but it won’t be our last.”
"Very much like with spam and the spam legislation last year, spyware can be fought through a combination of efforts: enforcement, legislation, technology and consumer education," said EarthLink attorney Dave Baker. "No one thing cures the problem by itself."
The FTC accuses Wallace and the two companies of using several techniques to lure surfers to sites where spyware was slipped into the surfers’ computers through flaws in Microsoft Internet Explorer. The spyware programs in question are believed to have changed the surfers’ home pages, changed their search engines, and launched barrages of popups, as well as adding other software tracking the surfers’ computer uses. Taken together, the FTC said, those programs also caused computer malfunctions, slowdowns, and crashes, costing consumers much valuable stored data.
And the FTC wants the court to put Wallace and the two companies out of business completely.
The commission said the techniques used included not just creating trouble for computer users by loading spyware onto their machines but also by spamming them to sell them solution tools. “The spyware causes the CD-ROM tray on computers to open,” the FTC said, “and then tells consumers “FINAL WARNING!! If your cd-rom drive(s) open…. You DESPERATELY NEED to rid your system of spyware pop-ups IMMEDIATELY! Spyware programmers can control your computer hardware if you failed to protect your computer right at this moment! Download Spy Wiper NOW!”
Wallace was nicknamed “Spamford Wallace” for his past stewardship of Cyber Promotions, which became notorious for sending up to thirty million spam messages a day until he left under pressure of litigation from America Online and CompuServe.
SmartBot, based in Pennsylvania, has long enough been dormant while Seismic, based in Rochester, New York, filed for Chapter 7 bankruptcy protection this week, according to a published report that also quotes Wallace as implying he’s being prosecuted in order to give some extra muscle to a pair of anti-spyware bills the U.S. House passed last week—one allowing hefty civil penalties against spyware purveyors and the other imposing criminal charges and jail terms—even though he’s being charged under different laws.
"We feel this is a political move and it is being made at the expense of legal business operations," Wallace said. "I am not surprised at all that my companies and I, Sanford Wallace, were picked as the 'poster boy.'"
