FTC Shuts Down Deceptive Scareware Scheme

FTC Shuts Down Deceptive Scareware Scheme
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An operator of an online "scareware" scheme will pay more than $8 million to settle Federal Trade Commission (FTC) 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 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.