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Court Orders Spyware Operator to Pay $4 Million

A federal court has ordered a man who was at the center of the nation's first "spyware" case to give up $4 million in ill-gotten gains.

Sanford Wallace was accused by the Federal Trade Commission of running an operation that infected computers with software that caused flurries of pop-up ads. It then tried to sell consumers cures called "Spy Wiper" and "Spy Deleter" for $30.

The order issued Wednesday by U.S. District Court in New Hampshire bars Wallace and his company, SmartBot.net Inc., from spreading spyware.

The FTC first accused Wallace of the spyware operation in a 2004 lawsuit. Last year, under an agreement with the FTC, Wallace agreed to stop infecting computers with the advertising programs.

Wallace, formerly of Barrington, has said he did nothing wrong and that he was being persecuted because of his past involvement in junk Internet mailings.

Wallace had said SmartBot offered business-to-business "permission-based" e-mail services. Back in 2004, he said SmartBot has long been dormant.

Wallace headed a company called Cyber Promotions in the '90s that sent as many as 30 million junk e-mails daily to consumers, earning him the nicknames "Spamford" and "spam king." He left the company after lawsuits from America Online and CompuServe.

In a related case Thursday, the government reached a settlement with Jared Lansky, an ad broker who disseminated ads containing Wallace's spyware. He is to give up $227,000 in ill-gotten gains.

In another case, Walter Rines of Stratham and his company, Odysseus Marketing, was also barred from spreading spyware. The FTC plans to ask the court to order them to give up their ill-gotten gains.

State and federal officials have been trying to combat the spread of spyware, unwanted programs that sneak onto computers, can bombard users with pop-up ads and drain processing power to the point of rendering computers unusable.

"Aggressive enforcement of this sort is absolutely vital if we're to continue our progress in battle against spyware," said Ari Schwartz, deputy director of the Center for Democracy and Technology. "

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