Wednesday, May 14, 2008

MySpace Wins Record $230 Million in Case Against 'Spam King'


In a landmark judgment, MySpace has been awarded $230 million in its suit against the so-called Spam King, Sanford Wallace and his partner Walter Rines. The decision, handed down in Los Angeles federal court on Tuesday, is the largest award so far since the CAN-SPAM Act was introduced in 2003.

MySpace decided to sue when it discovered the duo had lured MySpace users into revealing their login information through phishing sites. After obtaining user IDs and passwords, the pair distributed messages to the users' friends list with links to various Web sites involving gambling, pornography and ringtones.

According to court documents, Wallace and Rines distributed 735,925 messages during the scam and earned over $500,000 in the process. The spam campaign caused hundreds of complaints and a big headache for MySpace, especially since the spam indiscriminately sent pornography links to minors as well as adults.

The federal judge in the case fined the spam partners the maximum amount under the law. CAN-SPAM allows for fines of $100 per message and that number can be tripled for particularly abusive practices. The pair were fined $163.4 million under two parts of CAN-SPAM, Rines was singled out for an extra $63.4 million, $1.5 million was for violating California's anti-phishing laws. Rines and Wallace were also ordered to pay another $4.7 million for incurred legal fees.

A Legacy of Spamming and Litigation

Sanford Wallace is a spamming legend. Over the years he has run various companies including, Cyber Promotions, and Seismic Entertainment Productions - all have faced litigation. In 2006, the Federal Trade Commission won a judgment against Wallace for $4 million for a spyware-related scam. Wallace also made news in 1996, when he was blacklisted and refused service by several Internet Service Providers including AOL and Compuserve.

Can One Spam-Busting Suit Make a Difference?

The judgement against Wallace may seem to be a historic case and a warning to other spam-based businesses out there. But will it really work? MySpace thinks so. In an interview with the Associated Press, MySpace's security chief, Hemanshu Nigam, said, "Anybody who's been thinking about engaging in spam are going to say 'Wow, I better not go there'."

That sentiment seems doubtful to me. According to The Register Wallace's last known location was Las Vegas, but his current whereabouts are unknown; so collecting the money will be next to impossible. It may send a message, but it only works if you can actually punish the perpetrators.