Case Against International Spam Operation is First Using US SAFE WEB Act

A U.S. district court has ordered key players in an international spam ring to give up $3.7 million that they made by sending out illegal e-mail messages pitching bogus hoodia weight-loss products and a “human growth hormone” pill they claimed reversed the aging process.

In a Federal Trade Commission law enforcement action, the court found that the five defendants, located in Canada and St. Kitts, violated the FTC Act and the CAN-SPAM Act by participating in the spam operation. The court order bars the defendants from violating the CAN-SPAM Act and from making false or unsubstantiated claims about the health benefits of any food, drug, or dietary supplement.

The FTC charged that the operation used spammers to drive traffic to Web sites selling an extract of the hoodia gordonii plant it claimed would cause significant weight loss, and a “natural human growth hormone enhancer” it claimed would reverse the aging process. The FTC alleged that these claims were false or unsubstantiated, and charged the defendants with deceptive advertising in violation of federal law. It also alleged that the spammers sent e-mail that contained false “from” addresses and deceptive subject lines, and that they failed to provide a required opt-out link or physical postal address.

The case, filed by the FTC in October 2007, marked the first time the Commission invoked the US SAFE WEB Act, a federal law designed to protect consumers from cross-border fraud and deception. The Act enhances the agency’s ability to exchange information with foreign counterparts and helps protect consumers from cross-border spam and spyware distribution, as well as Internet fraud and deception. The FTC’s complaint charged eight defendants – Spear Systems, Inc., three other corporate defendants, and four individuals.

The Commission settled with three defendants in the case – Spear Systems, Inc. (a U.S. company) and two individuals, one in the United States and one in Australia – in May 2008. The agency was unable to reach settlements with the remaining five defendants, who are
the subject of the court order announced today: Xavier Ratelle and Abaragidan Gnanendran,
of Quebec, Canada; and corporate defendants 9151-1154 Quebec, Inc., 9064-9252 Quebec, Inc., and HBE, Inc. The final orders were entered by the United States District Court for the Northern District of Illinois, Eastern Division.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Full release with additional documents

MEDIA CONTACT:

Betsy Lordan
Office of Public Affairs
202-326-3707

STAFF CONTACT:

Steven Wernikoff
FTC’s Midwest Region, Chicago
312-960-5630

(Spear final NR.wpd)
(FTC File No. 0723085)