Web-Hosting Firm’s Shutdown Costing Adult Affiliate Operator $5K a Day

SAN JOSE, Calif. — When the Federal Trade Commission shut down access for web-hosting firm Pricewert last month, regulators put the squeeze on scores of customers outside the scope of a temporary restraining order against the data center.

One Pricewert customer — a mid-size Barcelona-based adult company that operates affiliate programs — has been brought to its knees because it now has to confront inoperable and truncated websites, destruction of webmaster program relationships and loss of funds from chargebacks and refunds.

Operators of New Concept Business S.L. say their online adult company was driven to a near halt after a judge signed the injunction against Pricewert, which is based in San Jose, Calif.

The FTC has accused Pricewert of shielding clients said to be engaged in criminal activities that include child pornography.

It also has charged Pricewert — doing business as 3FN.net, Triple Fiber Network, APX Telecom and APS Communications — of operating a botnet with command-and-control servers aimed at disseminating malware and conducting phishing attacks.

New Concept Business, which operates nearly two dozen adult websites with mostly sexual role-playing fantasy themes and affiliate programs Etu-Cash.com and Cash.Pornocruto.es, now has to face the cleanup of “dysfunctional” websites that are online but run so slow they are not commercially feasible. The operators also have a number of sites that are “100 percent not working.”

Attorney E. James Perullo, of Boston-based Bay State Legal Services, says that New Concept Business has been victimized by the whole affair.

“Though the underlining cause for the FTC’s action is admirable, their shotgun approach — no, their howitzer-while-blindfolded approach of protecting American consumers — is in the midst of destroying hundreds and possibly thousands of companies that host their businesses on those servers,” Perullo told XBIZ.

Perullo, who represents New Concept Business, said that the company is now in the beginning stages of fighting for its rights to be validated by the court as a viable third-party litigant, but the cost is staggering — the company is losing more than $5,000 in revenue each calendar day because of complications due to the FTC’s injunction.

“What is disconcerting is that the FTC can convince a federal judge to permit an injunction or a temporary restraining order against an ISP’s entire operation to stop just one of the ISP’s clients from continuing in illegal activities and that the judiciary is not enlightened enough to understand how an ISP works in the year 2009, thus permitting such an incident,” he said.

According to the FTC, the decision to shut off Pricewert’s access wasn’t based on finding that it had violated the law, but that there was suspicion it was involved in illegal activities. The FTC order also freezes Pricewert’s assets.

Perullo noted that some of New Concept Business’ sites have been moved over to other host companies, but he said that because of the scrutiny inherent in the apparent child pornography case the company won’t resurrect some of them, even though they have nothing to do with actual or simulated child pornography.

One of New Concept Business’ operators, through an interpreter, told XBIZ that the FTC’s move has been catastrophic for the online adult company.

“When visiting the company’s diminished sites today, the general adult community has no idea about the level of hardship the company has and is experiencing due to the inability to access their online backups,” the company spokesman told XBIZ. “The company spent weeks working to find as much of their old content as possible from GoogleGuide and other web cache sites.”

The company also risks further destruction of its business relationships, he said.

“For example, the banks could rightfully choose to terminate the merchant accounts, along with the potential loss of business with companies that rely on New Concept Business services to meet their financial-transaction and infrastructure needs,” he said. “Additionally, New Concept Business has end clients to accommodate. Many are not receiving what they have rightfully paid for. The company also is dealing with the loss of funds from chargebacks and refunds.”

In recent days the FTC issued an order appointing a temporary receiver for the Pricewert data center to help minimize issues from third parties, such as New Concept Business.

Regulators admit in a court filing that more than 20 Pricewert customers have stepped up and complained over the disruption.