Firms said to use ‘spyware’

CONCORD – A former nightclub owner who gained notoriety as “spam king” in the 1990s has been using “spyware” to hijack computers running Microsoft’s Internet Explorer Web browser, the Federal Trade Commission charges.

The FTC filed a complaint Wednesday in U.S. District Court seeking a restraining order against Sanford Wallace and two of his companies, Seismic Entertainment Productions of Rochester and of Barrington.

Wallace could not be reached for comment Thursday.

No hearing has been scheduled in the case, and one of the FTC’s lead attorneys, Laura Sullivan, did not return a call Thursday seeking comment on the case.

The FTC charges that the companies run advertisements and Web sites that surreptitiously install spyware to flood computers with pop-up ads, including ads selling software that purports to remove and block spyware.

In addition, the FTC charges, such companies typically earn commissions on sales from the other pop-up ads they disseminate.

Spyware, also known as adware, is a software program that can be installed onto computers without the users’ knowledge, and then used to do all manner of dirty deeds.

Once it sneaks into your computer, spyware can download other programs, and change existing programs. It may also be used to gather information (such as account numbers, passwords or browsing habits) from the infected computer, and send it back to whoever created the spyware.

Pop-up ads, however, are the most common cause and effect of spyware. Clicking on a pop-up can cause spyware to be downloaded onto a computer, and most spyware generates more pop-ups.

The FTC charges that such business practices violate federal fair trade laws, because people’s computers are modified without their knowledge or consent, and the spyware itself has little redeeming social or market value.

The FTC accuses Wallace’s companies of using pop-ups and ads on other Web sites to send computer users to Web sites he controls, and surreptitiously downloading spyware onto people’s computers.

The spyware then changes the Web browser’s homepage, hijacks its search function to produce advertising, and downloads and installs additional advertising programs that bury computer screens with pop-up ads, the FTC charges.

Among the ads the companies distribute are pop-ups for “Spy Wiper” and “Spy Deleter,” each of which sell for $30. The FTC’s complaint made no mention of whether either program works as advertised.

“In numerous instances, defendants’ practices cause or have caused consumers’ computers to malfunction, slow down, crash or cease working properly, and cause or have caused consumers to lose data stored on their computers,” the FTC complaint states.

“Consumers are required to spend substantial time and money to resolve these problems with their computers,” the complaint states.

The FTC has asked the court to order Wallace and his companies to stop spreading spyware immediately, and to make the companies hand back any “ill gotten gains.” The government also asks that it be reimbursed for the cost of bringing the suit.

The FTC hopes to file a 29-page legal memorandum to support its request, but lawyers first sought the court’s permission to exceed the usual 15-page limit, court records show.

Wallace first gained notoriety in the 1990s, when his company, Cyber Promotions, was a leading source of junk e-mails, or “spam,” according to Wired News ( and C-Net ( Several Internet service providers, including Earthlink, Compuserve and Prodigy, sued and won judgments against Wallace, Wired reported in 1998.

In 2002, Wallace bought the Plum Crazy nightclub in Rochester from a former spam partner, Wired News reported two years ago. The club has since closed down.