Court Stops Spammers from Circulating Unwanted Sexually-Explicit E-mails

The Federal Trade Commission has charged a network of corporations and individuals with using spam to sell access to online pornography. The FTC alleges that the defendants, acting as a single business enterprise, barraged consumers with e-mails containing sexually-explicit content without the required warning label. Four of the individual defendants controlled a network of corporations that own and operate the Web sites, payment systems, and servers used to distribute and to sell sexually-explicit content. The network also marketed its sexually-explicit content through an affiliate program that pays commissions to third parties who drive traffic to the network’s Web sites. Through this operation, the FTC alleges that the defendants violated the Adult Labeling Rule, the CAN-SPAM Act, and the FTC Act. A federal district court has issued a temporary restraining order (TRO) against the defendants. The TRO prohibits defendants from engaging in the deceptive practices and freezes the defendants’ assets, pending a preliminary hearing.

The FTC’s complaint names: Global Net Solutions, based in Las Vegas, Nevada; Global Net Ventures, Ltd., based in London, England; Wedlake, Ltd, allegedly based in Riga, Latvia; Open Space Enterprises, Inc., based in Las Vegas; Southlake Group, Inc., based in Las Vegas; WTFRC, Inc., doing business as Reflected Networks, Inc., based in Las Vegas; Dustin Hamilton; Tobin Banks; Gregory Hamilton; Philip Doroff; and Paul Rose.

“The law gives consumers a tool to control what comes into their inboxes,” said Lydia Parnes, Acting Director of the FTC’s Bureau of Consumer Protection. “Spammers beware! We are on the side of parents and kids to protect their ability to filter out sexually-explicit e-mails.”

According to the FTC, the defendants spammed hundreds of thousands of unsuspecting consumers with sexually-explicit or sexually-suggestive e-mails without their consent. The FTC alleges that the defendants did not include the required “SEXUALLY-EXPLICIT:” warning in the subject line of their sexually oriented messages, or failed to exclude the sexually oriented material from the initially-viewable content of the messages. The defendants also failed to identify clearly all of their messages as advertisements, instead misrepresenting, in some instances, that their services are free. The FTC also alleges that consumers were unable to stop the unwanted e-mail messages because the defendants did not provide the required “opt-out” notice.

The complaint charges that the defendants violated the Adult Labeling Rule by sending sexually-explicit e-mails that: failed to contain the required identifying mark; contained sexually-explicit material within the initially-viewable areas; and failed to include an opt-out before the sexually-explicit material.

The complaint also charges that the defendants violated the CAN-SPAM Act by sending e-mail or procuring third parties to send e-mail that:

• contained false or misleading transmission information;
• contained deceptive subject headings;
• failed to contain functioning opt-out mechanisms or did not contain any opt-out mechanisms;
• failed to identify the e-mail as an advertisement or solicitation; and
• failed to provide the sender’s valid physical postal address.

In addition, the FTC alleges that the defendants violated the FTC Act by falsely stating that membership to their Web sites was free. According to the FTC, by the time consumers realized that the defendants charged a fee for their Web sites, consumers had already given them their e-mail addresses.

The FTC is seeking preliminary and permanent injunctions to halt the illegal spam and redress for consumers.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court, District of Nevada, on January 3, 2005. This case was filed with the invaluable assistance of the Las Vegas Metropolitan Police Department and the office of the U.S. Attorney for the District of Nevada, which is serving as local counsel.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Lawrence Hodapp or Stephen L. Cohen
Bureau of Consumer Protection
202-326-3105 or 202-326-3222

(FTC File No. 042 3168)