FTC Alleges $467 Million Fraud Scheme Pushed By Internet Marketers, Affiliates

22 replies
The Federal Trade Commission has gone to federal court in Seattle to halt what it described as a $467 million fraud scheme operating in Canada, the United States, England and Cyprus, the agency said today. (May 17, 2011.)

"Shell corporations" were used to advance the scheme, and financial-service providers were hoodwinked into processing payments in part because the scammers set up "dummy" websites to sanitize the operations, the FTC said.

Canadian authorities worked with U.S. regulators to expose the scam, officials from both countries said.

“Internet fraud is a global problem that requires an international enforcement response,” said Lisa Campbell, deputy commissioner of competition for the Competition Bureau of Canada. “International cooperation ensures that fraudsters can’t hide behind borders.”

Consumer losses were estimated at $412 million (U.S.). Numerous individuals and companies were named defendants in the FTC action. The agency said the scheme falsely traded on the names of Oprah Winfrey, Rachael Ray, CNN, USA Today, CBS, the “60 Minutes” television show and other brands.

Winfrey has sued the principal defendant, Jesse Willms, according to records. Willims resides in Canada, and described the FTC action as a "disagreement."

A big part of the scheme allegedly centered on fraudulent billing practices. The FTC described the alleged scam as a continuity-billing scheme that sucked in customers by using a "free trial" lure.

Claims about purported cancer cures and weight loss through consumption of ****-berry products also were part of the scam, the FTC said.

At the same time, online "penny auctions" with hidden terms that resulted in bogus billing also were part of the fraud, the FTC charged.

Today alone the FTC brought actions that alleged online fraud of nearly half a billion dollars. The agency also sued a company in Florida, amid allegations it was conducting a precious-metals fraud on its website, which has been seized by a court-appointed receiver.

The Commodity Futures Trading Commission (CFTC) also sued the Florida company and its operators, alleging that customers were duped into believing they were purchasing precious metals stored in independent depositories.

In reality, the CFTC said, the purported precious-metals firm actually was a telemarketing "boiler room" and the purported metal purchases were fictitious.
#$467 #affiliates #alleges #fraud #ftc #internet #marketers #million #pushed #scheme
  • Profile picture of the author High Horsepower
    Good. I hope they get burned. Too many scam artist on the internet. Fake blogs, farticle sites, selling crap, continuity scams, cpa garbage, etc... I hope they lose everything
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  • Profile picture of the author Tim Franklin
    Good post, it is something that we as Marketers must become "fully aware of" there are several things that are coming and they are coming soon.

    Deception in internet Advertising.
    Claims must now be scientifically verifiable. (think about that)

    I posted on this topic in my Warrior Blog,
    Revised FTC Guides and how it could effect your business.

    Posted 01-21-2011 at 08:08 AM

    Trust me if you have not read this document you need to, it might take you about an hour to get through all the legal concepts but what they are talking about doing is "serious" It is no joke and it is not an over reaction, it is coming...

    I am preparing to be able to comply with these new guides because eventually if you do not you will pay a price, perhaps it might be just the loss of your business or your website, but it could be more serious if you are not aware of what this document states you should seriously considering taking the time to read through it.
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    • Profile picture of the author Morphius
      We really don't need bad name
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  • Profile picture of the author sbucciarel
    Banned
    That's pretty massive. Good to see it being cleaned up.

    Consumer losses were estimated at $412 million (U.S.)
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  • Profile picture of the author sbucciarel
    Banned
    Originally Posted by HelpingYouBeAnExpert View Post

    Eventually the FTC will make us all get a job and stop marketing so no one ever gets hurt. Big brother needs to do a better job telling us what is right and what is wrong no one should take responsibility for doing due diligence since one is grown up and why should they we have the government to protect us.
    Well, if all those assmonkeys in that FTC fraud suit and those who haven't been caught yet were actually capable of honest marketing and self-restraint, we wouldn't need the FTC to protect consumers, would we?

    I don't feel threatened in the least. For those who think that your job is threatened by a crackdown on fraud and scams, you probably should go get a job ... and try not to steal the office supplies while you're there.
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  • Profile picture of the author Bruce NewMedia
    Originally Posted by HelpingYouBeAnExpert View Post

    Eventually the FTC will make us all get a job and stop marketing so no one ever gets hurt. Big brother needs to do a better job telling us what is right and what is wrong no one should take responsibility for doing due diligence since one is grown up and why should they we have the government to protect us.
    Not so, imo...I'm as much a free market business person as anyone on this forum...but, if every con artist, charlatan, scammer and fraudster is basically allowed to roam the internet unchecked, no consumers will believe or trust anything we say.

    If this is the price to pay, (a vigilant protection agency) to keep some credibility for an honest marketer's message, I think it's a price worth paying.
    _____
    Bruce
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  • Profile picture of the author CyberSorcerer
    It's pretty simple in my opinion. It you're selling MMO product and saying that you can make $1,000/week working from home, then be able to provide proof of that when asked.

    And I don't mean show that you've made $1,000 IN ONE week. Show how you can at least average $1,000 a week.
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  • Profile picture of the author Mike McAleer
    I actually believe someone in my family fell into one of these traps and I told him not to continue with the scam but he did anyway. I could tell it was a scam and it is sad to see how ignorant people are of the online marketing world that they think some of these sites are legit.
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    • Profile picture of the author Sylonious
      Originally Posted by Mike McAleer View Post

      I actually believe someone in my family fell into one of these traps and I told him not to continue with the scam but he did anyway. I could tell it was a scam and it is sad to see how ignorant people are of the online marketing world that they think some of these sites are legit.
      Yeah, I had a couple family members ask me about some infomercial they saw late at night.

      These are the kind of people that any time you talk to them about anything computer related their brains turn to mush. I'll start to talk to them about going to community forums and reading articles on how to make money online and within 10 seconds they get this blank look on their face then awkwardly they change the subject.

      They want to make money online just as long as it doesn't require any kind of work like putting up a website, "writing stuff" or "paying for stuff".

      These people are hard workers at their job, but when it comes to doing something for themselves outside of work they can't motivate themselves to do anything that takes longer than 10 minutes.

      With someone like that any MMO product they buy will be a failure. It's a scam to even try and sell to a person like that, because they have zero chance of success.

      These are the people that the FTC wants to protect.
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      • Profile picture of the author sbucciarel
        Banned
        Originally Posted by Sylonious View Post

        With someone like that any MMO product they buy will be a failure. It's a scam to even try and sell to a person like that, because they have zero chance of success.

        These are the people that the FTC wants to protect.
        Here's the part you're missing from the equation. It's not just random Make Money Online opportunities. It's fraud.

        1. the scheme falsely traded on the names of Oprah Winfrey, Rachael Ray, CNN, USA Today, CBS, the "60 Minutes" television show and other brands.

        2. fraudulent billing practices...the alleged scam as a continuity-billing scheme that sucked in customers by using a "free trial" lure.

        3. Claims about purported cancer cures and weight loss through consumption of ****-berry products

        4. online "penny auctions" with hidden terms that resulted in bogus billing

        5. conducting a precious-metals fraud on its website, which has been seized by a court-appointed receiver. Customers were duped into believing they were purchasing precious metals stored in independent depositories. In reality, the CFTC said, the purported precious-metals firm actually was a telemarketing "boiler room" and the purported metal purchases were fictitious.
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        • Profile picture of the author Sylonious
          Originally Posted by sbucciarel View Post

          Here's the part you're missing from the equation. It's not just random Make Money Online opportunities. It's fraud.

          1. the scheme falsely traded on the names of Oprah Winfrey, Rachael Ray, CNN, USA Today, CBS, the “60 Minutes” television show and other brands.

          2. fraudulent billing practices...the alleged scam as a continuity-billing scheme that sucked in customers by using a "free trial" lure.

          3. Claims about purported cancer cures and weight loss through consumption of ****-berry products

          4. online "penny auctions" with hidden terms that resulted in bogus billing

          5. conducting a precious-metals fraud on its website, which has been seized by a court-appointed receiver. Customers were duped into believing they were purchasing precious metals stored in independent depositories. In reality, the CFTC said, the purported precious-metals firm actually was a telemarketing "boiler room" and the purported metal purchases were fictitious.
          These new regulations apply to everyone. Not just the scammers.

          At one point they were talking about requiring a machine-readable privacy policy (some sites charge $45 to have one made for you) and affiliate opt-in gates for all affiliate links.

          They might have changed the proposal after the PMA conference, but there is still talk about people being able to opt-out of affiliate tracking cookies.

          That will hit the mommy bloggers much harder than the scammers who aren't going to abide by these regulations, anyway.

          The "Do No Track" regulation requires that websites honor the machine readable "do not track" header. Obviously, a scammer would have no reason to do so.
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          • Profile picture of the author sbucciarel
            Banned
            Originally Posted by Sylonious View Post

            These new regulations apply to everyone. Not just the scammers.

            At one point they were talking about requiring a machine-readable privacy policy (some sites charge $45 to have one made for you) and affiliate opt-in gates for all affiliate links.

            They might have changed the proposal after the PMA conference, but there is still talk about people being able to opt-out of affiliate tracking cookies.

            That will hit the mommy bloggers much harder than the scammers who aren't going to abide by these regulations, anyway.

            The "Do No Track" regulation requires that websites honor the machine readable "do not track" header. Obviously, a scammer would have no reason to do so.
            The Do Not Track legislation has been proposed by a couple of Senators. The FTC has not taken a position on it. Do Not Track is a whole other conversation. The OP is about the FTC and fraudulent websites scamming consumers out of millions of dollars.

            FTC's Top Consumer Cop Praises Ad Industry | Digital - Advertising Age

            If your site generates complaints to Attorney Generals or the FTC, you have something to worry about.

            If you use fake testimonials and fake income claims and fake association with famous entities and fraudulent or misleading free offers with forced continuity, you have something to worry about.
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            • Profile picture of the author Sylonious
              Originally Posted by sbucciarel View Post

              The Do Not Track legislation has been proposed by a couple of Senators. The FTC has not taken a position on it. Do Not Track is a whole other conversation. The OP is about the FTC and fraudulent websites scamming consumers out of millions of dollars.

              FTC's Top Consumer Cop Praises Ad Industry | Digital - Advertising Age

              If your site generates complaints to Attorney Generals or the FTC, you have something to worry about.

              If you use fake testimonials and fake income claims and fake association with famous entities and fraudulent or misleading free offers with forced continuity, you have something to worry about.
              The FTC testified on "do not track" before congress late last year. Rockefeller decided to use it to score some political points, but it was always the FTC's idea.

              It's relevant because this caused the FTC to consider including affiliate marketing in the "do not track" legislation. This is their "solution" to the problem of scammers.

              The "Do Not Track" regulation might have a negative effective on Amazon and other affiliate networks as well as contextual advertisers.
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              • Profile picture of the author sbucciarel
                Banned
                Originally Posted by Sylonious View Post

                The FTC created the "do not track" regulations and brought it to the attention of Jay Rockefeller not the other way around.

                It's relevant because this caused the FTC to consider including affiliate marketing in the "do not track" legislation. This is their "solution" to the problem of scammers.

                The "Do Not Track" will hit your Amazon affiliates just as bad as it will the 3rd party behavioral advertising.
                They did not "create" them. Your own source url says they testified in a hearing and it's up to Senate and Congress to pass legislation on it. It still has nothing to do with the OP and is not their solution to scammers. Their solution to scammers is exactly described in the OP. Prosecute them.
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                • Profile picture of the author Sylonious
                  Originally Posted by sbucciarel View Post

                  They did not "create" them. Your own source url says they testified in a hearing and it's up to Senate and Congress to pass legislation on it. It still has nothing to do with the OP and is not their solution to scammers. Their solution to scammers is exactly described in the OP. Prosecute them.
                  My source says that the FTC introduced "Do Not Track" at that hearing. "Do Not Track" was their idea. If they hadn't brought it before congress Jay Rockefeller wouldn't be pushing it now.
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                  • Profile picture of the author Kay King
                    When complaints from the public become too loud to be ignored - the FTC starts asking questions and investigating.

                    On this particular prosecution, the initial scammers had excuses they thought would cover them but as the scam spread even that was lost. One person using the "as shown on...." crap told me "well, they advertised on that network so it was 'seen on' ". Yeah, right, tell that to the judge.

                    Common sense should tell you the growth of online sales will lead to closer scrutiny of online sellers - so work your business with that in mind.

                    kay
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  • Profile picture of the author KenThompson
    That is pretty massive. Heads are gonna roll over that one. They'll
    get to be good pals with Bruno for a while.

    I always wonder about the ones, similar in scope, who don't get
    caught.


    Ken

    PS - Assmonkeys?
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  • Profile picture of the author veracity
    I'm pretty new to IM but I have to say, the reason I probably avoided it for so long was because of things like this. I remember all the sites with the fake 'as seen on CNN, ABC, NBC, Oprah' logos. Personally, I never believe most of them for a second. Of course I hope there are other ways than this to make money in IM.
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  • Profile picture of the author Ian Varnava
    Originally Posted by HelpingYouBeAnExpert View Post

    Eventually the FTC will make us all get a job and stop marketing so no one ever gets hurt. Big brother needs to do a better job telling us what is right and what is wrong no one should take responsibility for doing due diligence since one is grown up and why should they we have the government to protect us.
    I'm just a simple man trynna make a dolla out of 15 cents... hopefully I can slip under the radar. I don't wanna get a job.
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  • Profile picture of the author Richard Van
    Originally Posted by Chris Kent View Post

    It is getting harder and harder to do direct marketing on the internet. This is yet more reason to go into more passive, rather than active, marketing.

    btw I'm curious about the England and Cyprus quotes. Do FTC have jurisdiction there?

    The Cyprus angle sounds like tax evasion.
    Don't quote me on this Chris but as far as I'm aware, the FTC can't swat a fly over here, having said that, they can always collaborate with the powers that be here, I'm sure.
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