Scareware marketer ordered to pay $163M fine

At the Federal Trade Commission’s request, a federal court imposed a judgment of more than $163 million on the final defendant in the FTC’s case against an operation that used computer “scareware” to trick consumers into thinking their computers were infected with malicious software, and then sold them software to “fix” their non-existent problem.

The court order also permanently prohibits the defendant from selling computer security software and any other software that interferes with consumers’ computer use, and from any form of deceptive marketing.

In 2008, as part of the FTC’s efforts to protect consumers from spyware and malware, the FTC charged seven defendants with conning more than one million consumers into buying software to remove malware supposedly detected by computer scans.

The FTC charged that the operation used elaborate and technologically sophisticated Internet advertisements 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.

The U.S. District Court for the District of Maryland subsequently ordered a halt to the massive scheme, pending litigation.

In February 2010, defendants ByteHosting Internet Services, James Reno, Marc D’Souza and Maurice D’Souza settled with the FTC. Under a settlement announced in 2011, two defendants were ordered to give up $8.2 million in ill-gotten gains.

Also in February 2010, default judgments were entered against corporate defendant Innovative Marketing, and two defendants for failure to appear and participate in this litigation.