Federal investigators have cracked down on two spam operations that it says have clogged the Internet with millions of deceptive messages and violated federal laws. The companies targeted are Phoenix Avatar of Detroit and Global Web Promotions, which opeerates out of Australia and New Zealand.

A U.S. District Court judge has barred Phoenix Avatar from further spamming and has frozen the defendants assets. Federal agents yesterday executed a criminal search warrant and said they were in the process of arresting four principals in that case. The FTC has filed legal actions against Global.

Both operations have been identified by the anti-spam organization Spamhaus as among the largest spammers in the world. The FTC says it has received more than 1 million complaints about the two.

It's the first criminal case to be brought under the CAN-SPAM Act, which went into effect in January.

The cyber scam artists who exploit the Internet for commercial gain should take notice. Federal law now makes it a felony to use falsehood and deception to hide the origin of the spam messages hawking your fraudulent wares," said Jeffrey G. Collins, U.S. Attorney for the Eastern District of Michigan.

Phoenix Avatar

The FTC charged Phoenix Avatar and its Detroit-based principals with sending illegal spam to sell bogus diet patches. Consumers who wanted to purchase the products clicked on a hyperlink in the message and were connected to one of the defendants many Web sites. The agency alleges the defendants were earning nearly $100,000 per month from product sales. The FTC alleges that the claims made for these diet patches are false and that the patches, which sell for $59.95, will have no effect at all.

The spammers hoped to obscure their identities by using innocent third party e-mail addresses in the reply-to or from fields of their spam a practice known as spoofing. When spam was undeliverable and bounced back, tens of thousands of undelivered e-mails bounced to unwitting third parties, sometimes getting the third parties mislabeled as spammers, themselves. The spam did not offer consumers the ability to opt out of receiving future e-mail.

The agency charged that the deceptive claims violate the FTC Act and that the spoofing and failure to provide an opt-out capability violate provisions of the recently enacted CAN-SPAM Act. At the FTCs request, U.S. District Court Judge James F. Holderman entered a Temporary Restraining Order requiring an end to illegal spamming and deceptive product claims and freezing the defendants assets.

On April 28, federal criminal authorities executed a search warrant on a residential location in West Bloomfield, Michigan, and arrested Christopher M. Chung and Mark M. Sadek. Arrest warrants are outstanding for defendants James Lin and Daniel J. Lin. In a criminal complaint issued by the U.S. Attorneys Office, these individuals have been charged with violations of the federal mail fraud laws as well as with criminal violations of the CAN-SPAM Act.

Global Web Promotions

In the second case, the FTC filed legal charges against Global Web Promotions Pty Ltd., an Australian company that the FTC alleges is responsible for massive amounts of spam in the United States. Global Web not only advertised a diet patch similar to the one in Phoenix Avatar, it also claimed its human growth hormone products HGH and Natural HGH could maintain [a users] appearance and current biological age for the next 10 to 20 years.

Experts cited by the FTC dispute the claims, and the FTC alleged the claims are false. The products do not contain growth hormone of any sort, according to papers filed with the court.

The products are shipped to consumers from within the United States. The diet patch was sold for $ 80.90 and the HGH products cost $74.95.

In both cases, the FTC introduced as evidence thousands of examples of the defendants spoofing a wide array of victims, including AOL, Microsoft Network, and other companies and individuals.

Spoofing involves forging headers on e-mail to make it appear that they came from an innocent third party. Undeliverable e-mail is returned to the innocent victim, often flooding their servers and interfering with normal operations. This process not only is prohibited by the CAN-SPAM Act, it also has worked real hardship on innocent businesses.

The FTC charged Global Web Promotions Pty Ltd., Michael John Anthony Van Essen, and Lance Thomas Atkinson with violations of the FTC Act and the CAN-SPAM Act. The FTC has filed a motion requesting that the Court issue a Temporary Restraining Order barring further illegal spam and stopping illegal sales and shipment of products.

The Global Web Promotions Pty case was brought with the assistance of the Australian Competition and Consumer Commission and the New Zealand Commerce Commission.