FTC files first CAN-SPAM cases
- By William Jackson
- Apr 29, 2004
The Federal Trade Commission has filed the first criminal cases under the CAN-SPAM Act, accusing companies in the United States and Australia of fraudulent e-mail advertising of medical and herbal products.
In a case filed yesterday in federal court in Chicago, two companies and four individuals were charged with violations of the FTC Act, which covers false and unfair trade practices, and CAN-SPAM, which prohibits deceptive commercial e-mail.
The FTC said two persons have been arrested in Detroit and two arrest warrants remain outstanding. The four had been taking in as much as $100,000 a month selling phony diet patches, according to court papers.
FTC is responsible for enforcing the Controlling the Assault of Non-Solicited Pornography and Marketing Act, which went into effect Jan. 1, when the offenses also were added as violations of the FTC Act.
According to court filings, about 490,000 spam messages advertising diet patches were forwarded to FTC by consumers. A joint investigation by FTC and the U.S. Postal Inspector traced the e-mails to Phoenix Avatar LLC of Las Vegas and DJL LLC of Birmingham, Mich. Associated with the companies are Daniel J. Lin, Mark M. Sadek, James Lin and Christopher M. Chung.
According to the FTC complaint, not only were the patches bogus, but the e-mails violated CAN-SPAM by containing spoofed 'from' addresses and not including an opt-out from receiving future e-mails. The companies operated through hundreds of Web sites, accessed through hyperlinks in e-mail. The patches sold for $59.95 for a 30-day supply.
The four men live together in West Bloomfield in suburban Detroit and 'take great strides to conceal their identity when selling their products.'
Phoenix Avatar was listed as the merchant on credit card purchases and DJL banked the receipts. Mail to the defendants was delivered to a bar.
Sadek and Chung have been arrested. A temporary restraining order was issued against the defendants and their assets frozen to preserve funds for relief to consumers.
Charges also were filed against Global Web Promotions Pty Ltd. of Australia, and Michael John Anthony and Lance Thomas Atkinson. Nearly 400,000 e-mails from that company, advertising diet patches and human growth hormones, were forwarded to FTC. That case was brought with the help of the Australian Competition and Consumer Commission.
William Jackson is a Maryland-based freelance writer.