Microsoft, Washington State Sue Over Scareware

Slav Kandyba
SEATTLE — Washington State and Microsoft Corp. are suing a Texas man and his businesses for allegedly operating a “scareware” scam on the Internet.

James Reed McCreary IV, of Woodlands, Texas, is the individual named in the lawsuit, filed in King County Superior Court on Oct. 1. Also named are an inactive Texas corporation, Branch Software Inc., which marketed software called Registry Cleaner XP, and Alpha Red Inc., a Houston-based company that provides various web services.

XBIZ’ attempts to reach McCreary were not immediately successful.

The lawsuit targets McCreary for running a business that violated the state Computer Spyware Act and constituted unfair business practices under the state Consumer Protection Act. It seeks a permanent injunction and damages, restitution and civil penalties.

Registry Cleaner XP was advertised to users of computers running Microsoft Windows through pop-ups of the operating system’s Windows Messenger Service. Also known as “net send messages” or “messenger spam,” they were made to look like official Windows messages that told users their computer’s registry was infected and needed repair.

Clicking the message would lead to downloading of free scan software for Registry Cleaner XP and, eventually, a $39.95 charge to install the full version and repair the computer of the “errors discovered by the scan.”

“[Branch Software] are in competition with others engaged in the sale and marketing of these products in and from Washington,” according to the lawsuit.

This kind of scareware is emerging as a money-making scheme by tech-savvy criminals, Ryan Sherstobitoff, chief corporate evangelist global anti-virus specialist Panda Security, told XBIZ.

Its installation on computers could yield credit card numbers as well as other personal information, Sherstobitoff said.

There may be “a whole onslaught of teams around the world” producing scareware, Panda’ security researcher Sean-Paul Sorrell said.

“The line does get kind of blurry between this company and others that are similar to it,” Sorrell said. “This one is a U.S. corporation backing this software with marketing techniques.”

Because there may be instances of organized criminal organizations controlling scareware for their benefit, many adult affiliate programs can find themselves victims of extortion scams, Sorrell told XBIZ.

One example Sorrell gave was Motigo, a web analytics service. Scareware purveyors may purchase advertising for Motigo on affiliate sites. The resulting pop-ups, which weren’t originally intended to be malicious, end up being hijacked.