Feds Followed the Money in Spam Lawsuit

Gretchen Gallen
WASHINGTON – Even in the high-tech information age the most basic investigative tactics can pay off. In the recent case of the federal government's naming of four suspects accused of violating the terms of the Can-Spam Act of 2004, investigators are saying that all they did was "follow the money."

In tracking down the four defendants, Daniel J. Lin, James J. Lin, Mark M. Sade, and Christopher Chung, investigators said they followed the purchase of an online weight loss patch and then followed the money trail all the way to Detroit-based Phoenix Avatar. The lawsuit is the first of its kind so far filed under the terms of the federally enforced anti-spam legislation.

Phoenix Avatar also operated under the names AIT Herbal, Avatar Nutrition, and others, the FTC said in a statement. Profits are estimated at $100,000 per month on sales of weight loss products, which sold for $80.90, and growth hormone products, which sold for $74.95, and according to investigators, did not contain any growth hormones.

The FTC has proof that Avatar used "spoofing" methods to dupe consumers, which involves forging headers on email to make it appear that they came from an innocent third party.

Under the new federal law it is now a felony to use false and deceptive email marketing practices to hide the origin of the spam messages. After months of trying to trace the origin of the emails themselves, investigators decided to take a more old-fashioned route and simply waited to see who charged their credit card in the purchase.

"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 email itself," he added, because of forged return addresses.

The four defendants, arrested yesterday in West Bloomfield, Mich., were running what is considered one of the largest spam operations in the country, according to UK-based Spamhaus, an Internet security company.

Only two of the men have so far appeared in U.S. District Court.

The FTC also filed a legal action against Global Web Promotions, a spam enterprise based in Australia and New Zealand, which solicits bogus growth hormone products.

Both companies have been brought to a standstill from the joint efforts of the U.S. Attorney’s Office in Detroit and the U.S. Postal Inspection Service, which have been tracking them since Can-Spam was first enacted on Jan. 1, 2004. To date, the FTC has collected 490,000 emails as evidence against Phoenix Avatar.

“The cyber scam artists who exploit the Internet for commercial gain should take notice," said Jeffrey G. Collins, U.S. Attorney for the Eastern District of Michigan.

All four suspects face five years in prison under the terms of Can-Spam and up to 20 years in prison under U.S. mail fraud statutes.