First criminal charges brought under CAN-SPAM Act

Out-Law News | 30 Apr 2004 | 12:00 am | 3 min. read

The first criminal prosecutions under the new US federal anti-spam law were brought this week. Charges were raised against four spammers who were involved in sending unsolicited e-mails advertising bogus diet patches, the Federal Trade Commission announced yesterday.

Christopher Chung and Mark Sadek of West Bloomfield, Michegan, were arrested on Thursday and charged with violation of the federal mail fraud laws and with criminal violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act, a name contrived for the acronym CAN-SPAM.

Arrest warrants are also outstanding for James Lin and Daniel Lin, who face the same charges. All four defendants were connected with selling through a trading company which used a variety of corporate names, including Phoenix Avatar. Phoenix Avatar has been in the FTC's sights for some time.

The CAN-SPAM Act, which came into force on 1st January 2004, established a framework of administrative, civil, and criminal tools to tackle unsolicited commercial e-mail. It took six years of drafting, debate and compromise to reach the statute books, but critics accuse it of being narrow and weak.

Despite it's name the CAN-SPAM Act fails to actually "can" spam. There is no ban on sending unsolicited commercial e-mail or text messages. Instead, it requires that spam sent to consumers includes a means of opting-out of the mailing list used by the sender.

The Act also provides for a national Do-Not-Spam list, bans the sending of fraudulent e-mails or unmarked sexually oriented e-mails, and provides for civil and criminal sanctions for those spammers who breach the rules. The penalties may amount to fines of $6 million and five years in prison in the most severe cases.

The prosecutions announced yesterday will be the first serious test of the new law, and form part of an FTC-led crack down. The crack down has focused in particular on two spam operations, one of which was Phoenix Avatar. Another case has been filed against Global Web Promotions, a spam enterprise operating from Australia and New Zealand.

FTC Case Against Phoenix Avatar

The FTC charged Phoenix Avatar and its principals with sending illegal spam, and alleges that the defendants were earning nearly $100,000 per month from product sales of their bogus diet patches.

The spammers hoped to obscure their identities by using innocent third party e-mail addresses in the "reply-to" or "from" fields of their spam – a practice known as spoofing.

When spam was undeliverable and bounced back, tens of thousands of undelivered e-mails bounced to unwitting third parties, sometimes getting the third parties mislabelled as spammers themselves. Furthermore, the spam did not offer consumers the ability to opt-out of receiving future e-mail.

The FTC charges allege that the deceptive claims violate the Federal Trade Commission Act and that the spoofing and failure to provide an opt-out capability violate provisions of the CAN-SPAM Act. At the FTC's request, US District Court Judge James Holderman granted an injunction prohibiting the illegal spamming and deceptive product claims, and froze the defendants' assets.

FTC Case Against Global Web Promotions

In the second case, the FTC filed legal charges against Global Web Promotions Pty Ltd; an Australian company that the FTC alleges is responsible for massive amounts of spam in the US. Global Web Promotions not only advertised a diet patch similar to the one promoted by Phoenix Avatar, it also marketed anti-aging products – both of which FTC experts said did not work. Global Web Promotions had also "spoofed" its e-mails in order to hide its tracks, said the FTC.

The FTC charged Global Web Promotions Pty Ltd, Michael John Anthony Van Essen, and Lance Atkinson with violations of the FTC Act and the CAN-SPAM Act. The FTC has also requested an injunction barring further illegal spam and stopping illegal sales and shipment of products.

According to Jeffrey Collins, US Attorney for the Eastern District of Michigan:

"The cyber scam artists who exploit the internet for commercial gain should take notice. Federal law now makes it a felony to use falsehood and deception to hide the origin of the spam messages hawking your fraudulent wares. Thanks to the great detective work of the Federal Trade Commission, the Postal Inspection Service, and the cooperation of Internet Service Providers such as Microsoft and AOL, as well as other companies and private citizens, we do have the capacity to track unlawful spammers down and bring them to justice."

FTC Chairman Timothy Muris said:

"Working with law enforcement partners can maximise our impact. These cases should send a strong signal to spammers that we are watching their operations and working together to enforce the law."