MySpace Wins $230 Million From "Spam King" Wallace

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U.S. District Judge Audrey Collins handed down the landmark decision after the notorious spam team failed to appear in court. Collins imposed $157.4 million in damages against both Rines and Wallace and an additional $63.4 million against Rines under the 2003 CAN-SPAM Act.

In addition, Collins awarded MySpace $1.5 million against the duo under California's anti-phishing law, as well as $4.7 million in attorney fees, and issued injunctions that prohibit further spamming activities in the future.

"MySpace has zero tolerance for those who attempt to act illegally on our site," said MySpace's chief security officer, Hemanshu Nigam in a written statement. "We remain committed to punishing those who violate the law and try to harm our members."

The judgment is a big win for Los Angeles-based MySpace, representing the largest amount on record sought against a spamming and phishing operation. MySpace said that altogether, the spam team sent 735,925 messages to its members. MySpace contended that the copious amount of emails violated CAN SPAM, which puts serious restrictions on commercial e-mail such as banning false or misleading header information, prohibiting deceptive subject lines, requiring that recipients have an opt-out method, and placing strict limitations on the amount of commercial messages sent per month.

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The CAN SPAM Act also requires that all commercial e-mail be clearly labeled as advertisement -- which the spammers violated when the sent messages the appeared to be from users' "friends" and other legitimate sources.

The social networking organization maintained that the junk mail cost the company copious amounts of money, while taking up bandwidth and eliciting hundreds of complaints from users. The company also said that some of the links contained in the spam messages led to pornographic Web sites, which could potentiall harm many of MySpace's teen users.

Consequently, MySpace is entitled to $100 for each violation. However experts are skeptical that the company will receive the money any time soon or that the decision will do much to reduce the amount of spam companies receive in their inboxes.

"In the U.S. context, it might give pause to people who get into that business," said Peter Cassidy, secretary general of the Anti-Phishing Working Group. "It does say one thing, once you get big enough and start causing trouble with the elites, they'll find a way to deal with you."

Despite diminished chances that MySpace might recover any of the award, company officials maintain that the company hopes the decision will serve as a deterrent to future cyber criminals who are contemplating illicit spam activity for profit.

However, Wallace is hardly a stranger to illegal Internet activity. In May 2006, a federal judge ordered Wallace to halt operations and surrender more than $4 million in "ill gotten gains" after the Federal Trade Commission alleged in a lawsuit that his company exploited a security vulnerability in Microsoft's Internet Web browser to distribute spyware. The FTC claimed that the illicit business deceptively downloaded spyware onto users computers, changed their settings and hijacked their search engines.

Meanwhile, MySpace is in the midst of pursuing litigation with Scott Richter, who it claims sent spam messages to users after gaining access to profiles using stolen passwords.

Experts assert that the decision might set a precedent for larger companies to start cracking down on spam that eats up time and resources.

"Hopefully it will go beyond spam, and go into other problems like electronic crime," said Cassidy. "Companies understand that they have to police their community. Keeping it neat and orderly is doing their job, It's just the cost of doing business."