The government's first criminal case under a new law outlawing some types of spam e-mails was based on low-tech investigative methods: Authorities followed the money.
Investigators said Thursday they tracked defendants by purchasing a weight-loss product for $59.95 and waited to see who collected the money.
That explanation was a tacit acknowledgment of the difficulties tracing electronic sales pitches that can carry forged return addresses and bounce through unprotected relay computers on the Internet.
"We buy the product and see who charges our credit card," said Howard Beales, director of the consumer protection bureau at the Federal Trade Commission. "It's virtually impossible to trace the e-mail itself."
Court records identified the four U.S. defendants as Daniel J. Lin, James J. Lin, Mark M. Sadek and Christopher Chung of West Bloomfield, Mich., near Detroit. A warrant was issued for the Lins but they have not been arrested. Chung and Sadek appeared in U.S. District Court and were released on unsecured bonds.
Sadek's lawyer, James L. Feinberg, said his client will plead not guilty. Authorities said they faced up to five years in prison under the anti-spam law and up to 20 years in prison under U.S. mail fraud statutes.
"The cyber scam artists who exploit the Internet for commercial gain should take notice," said Jeffrey G. Collins, the U.S. attorney in Detroit. "Federal law now makes it a felony to use falsehood and deception to hide the origin of the spam messages hawking your fraudulent wares."
Court papers described a nearly inscrutable puzzle of corporate identities, bank accounts and electronic storefronts used to send hundreds of thousands of e-mail sales pitches for fraudulent weight-loss products.
The FTC said angry consumers forwarded more than 490,000 e-mails from the operation from January until April - more than from any other spam outfit worldwide during the same period. Beales called it a "dubious distinction."
The FTC also announced legal action Thursday against an Australian company, Global Web Promotions Pty Ltd., which investigators said pitched fraudulent weight-loss and growth-hormone products. It said it brought its case with help by the Australian Competition and Consumer Commission and the New Zealand Commerce Commission.
Authorities said the U.S. company sold a weight-loss patch under the corporate names AIT Herbal, Avatar Nutrition, Phoenix Avatar and others. The company allegedly operated out of Detroit and nearby communities of West Bloomfield and Birmingham.
The FTC said U.S. District Court Judge James F. Holderman froze the operation's assets - profits estimated at $100,000 each month -- at its request.
"Working with law enforcement partners can maximize our impact," FTC Chairman Timothy J. Muris said. "These cases should send a strong signal to spammers that we are watching their operations and working together to enforce the law."
By Ted Bridis