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Three individuals charged in $100 million scareware scheme

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May 28, 2010

U.S. federal prosecutors have accused three individuals of running a fraudulent operation that used false advertising to mislead Internet users everywhere in the world into buying more than $100 million worth of useless anti-virus software.

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According to a court indictment filed yesterday, the three men operated companies under the names of Innovative Marketing and Byte Hosting Internet Services, which consisted in an elaborate scheme that duped Internet publishers into posting malware-laced ads on their sites.

The ad banners allegedly presented messages falsely claiming visitors' computers contained dangerous malware and other defects that could be repaired by buying bogus software that cost from $30 to $70 or more.

The scheme often tricked Internet users into purchasing multiple sham products, which were sold under names including Malware Alarm, Antivirus 2008 and VirusRemover 2008.

Filed in the U.S. District Court of Chicago, the charges largely echo some allegations the Federal Trade Commission made in December 2008 against operators of the two same companies.

The federal judge hearing that case has held Innovative Marketing in contempt of court and fined it $8,000 per day for failing to comply with a temporary restraining order to shut down the scareware operation.

To keep the scheme alive, the three men allegedly established multiple merchant accounts to allow victims to purchase the rogue anti-virus products. That allowed them to have a fresh account to use when an older one got shut down because of repeated requests for refunds. They also used multiple payment sites.

The 57-page indictment names Shaileshkumar Jain, 40, a U.S. citizen who is believed to be living in the Ukraine, James Reno, 26, of Amelia, Ohio and Bjorn Sundin, 31, a Swedish citizen.

Each men were charged with one count each of computer fraud and conspiracy to commit computer fraud.

Sundin and Jain were each charged with 24 counts of wire fraud, and Reno was charged with 12 counts of wire fraud.

Each count of wire fraud carries a maximum sentence of 20 years in prison and a minimum $250,000 fine. Prosecutors are also seeking the forfeiture of $100 million from a bank account located in the Ukraine.

The three defendants stand accused of setting up at least seven fictitious advertising agencies that placed ads on unnamed Web sites. The ads redirected viewers to other sites that presented graphics that mimicked virus scans falsely claiming that computers were riddled with a variety of dangerous infections and viruses.

The indictment claimed Sundin, Jain and several unnamed individuals owned and operated Innovative Marketing, the Belize-based company that sold the software.

Reno and others allegedly owned Byte Hosting, which prosecutors said operated call centers that provided technical and billing support to victims of the scam.

In total, the scheme is alleged to have duped Internet users in 63 countries into making worthless purchases of anti-virus software and other programs.

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Source: The U.S. DoJ.

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