“Phishers” Settle Federal Trade Commission Charges

June 17, 2004

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Scam artists who used deceptive spam and copycat Web sites to con consumers into turning over confidential financial information have agreed to settle charges that their scam violated federal laws. One defendant faces 46 months in prison on criminal charges.

The defendants will be barred from sending spam, barred from making false claims to obtain consumers’ financial information, barred from misrepresenting themselves to consumers, and barred from using, selling, or sharing any of the sensitive consumer information collected. Based on financial records provided by the defendants, the FTC agreed to consider the $125,000 judgments in each case satisfied.

If the court finds that the financial documents were falsified, however, the defendants will pay $125,000 in consumer redress.

The scam, called “phishing,” worked like this: Posing as America Online, the con artists sent consumers e-mail messages claiming that there had been a problem with the billing of their AOL accounts. The e-mail warned consumers that if they did not update their billing information, they risked losing their accounts.

The messages directed consumers to click on a hyperlink in the body of the e-mail to connect to the “AOL Billing Center.” When consumers clicked on the link they landed on a site that contained AOL’s logo, AOL’s type style, AOL’s colors, and links to real AOL Web pages. It appeared to be AOL’s Billing Center. But it was not. The defendants had hijacked AOL’s identity and used it to steal consumers’ identities. The defendants ran a similar scam using the hijacked identity of PayPal.

The FTC charged the defendants with violating the FTC, which bars unfair and deceptive practices, and the Gramm Leach Bliley Act, which bars using false or fictitious statements to obtain consumers’ financial information.

The defendant named in one of the complaints is Zachary Keith Hill. The Hill case was filed in December 2003, in the U.S. District Court for the Southern District of Texas. The other case, filed in May 2004, charged an unnamed minor in U. S. District Court for the Eastern District of New York.

A newly revised FTC Consumer Alert, “How Not to Get Hooked by a ‘Phishing’ Scam” warns consumers who receive e-mail that claims an account will be shut down unless they reconfirm their billing information not to reply or click on the link in the e-mail. Consumers should contact the company that supposedly sent the message directly. More tips to avoid phishing scams can be found at www.ftc.gov/bcp/conline/pubs/alerts/phishingalrt.htm.

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