FTC gets $163 million ruling against scareware defendant

A U.S. judge has imposed a judgment of US$163.2 million against a defendant accused by the U.S. Federal Trade Commission of being part of an operation that sold software to people it tricked into thinking their computers were infected with malicious software.

Judge Richard Bennett of U.S. District Court for the District of Maryland ordered defendant Kristy Ross, vice president of Business Development for Ukraine-based Innovative Marketing, in a Sept. 24 ruling. In late 2008, the FTC filed a complaint charging Ross, Innovative Marketing and other defendants with distributing scareware.

FTC charged Ross and the other defendants with conning more than 1 million consumers into buying software to remove malware supposedly detected by computer scans. The operation used elaborate and technologically sophisticated Internet advertisements saying that a system scan had detected malicious software and other dangerous files on the computer of the person viewing the ad.

The advertisements then advised computer users to clean off the malware by buying the defendants’ software for $40 to $60.

Innovative Marketing, founded in mid-2002, grew to employ more than 600 people in the U.S., Ukraine, India and elsewhere, according to court documents.

Lawyers for Ross were not immediately available for comment. In a court trial, Ross’ lawyers had argued that she did not control the company and should not be held liable for its operations.

Under a settlement announced in 2011, defendants Marc D’Souza and Maurice D’Souza were ordered to give up $8.2 million in profits from the operation. Marc D’Souza was an officer with the company, while his father Maurice D’Souza was charged as a relief defendant who did not participate in the scam, but allegedly profited from it. Two other defendants previously settled the charges against them, and the FTC obtained default judgments against three other defendants.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant’s e-mail address is grant_gross@idg.com.