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Tech Cos. To Pay Nearly $10M In Malware Scam Crackdown
By Carolina Bolado

Law360, Miami (May 15, 2017, 5:10 PM EDT) -- An international tech support operation has agreed to pay nearly $10 million to settle allegations by the Federal Trade Commission and Florida's attorney general that the company tricked consumers into thinking their computers were compromised, part of a nationwide crackdown on fake technical support and security software companies.
In a filing Friday in Illinois federal court, the FTC asked the court to enter a stipulated order that would permanently bar Help Desk National and its related entities from advertising, marketing, promoting, selling or providing any tech support product or services. The company and the individual defendants will also have to pay $9,948,674 under the terms of the deal.

The settlement is part of the FTC's so-called Operation Tech Trap, through which the agency and its local law enforcement partners have identified dozens of companies allegedly swindling customers, often senior citizens, out of hundreds of dollars by claiming to be authorized by major tech companies, diagnosing their computers with nonexistent problems and offering pricey fixes. They are pursuing suits against companies operating in Ohio, Alabama, Florida, Colorado, Connecticut, Pennsylvania and Illinois under state laws and the agency’s Telemarketing Sales Rule prohibiting misrepresentations of services.

Since the FTC initiated Operation Tech Trap last year, it has taken a total of 29 law enforcement actions against fraudulent information technology services. On Friday, the agency announced four new complaints attempting to recover millions of consumer dollars, three of which were already granted temporary restraining orders that prevent the scammers from continuing to operate and freeze their assets.

State and federal agencies shut down the Help Desk National operation in July and accused the defendants of running a scheme since at least January 2015 that targeted senior citizens and featured “high-pressure sales tactics” that the companies used on consumers in an effort to get them to pay for computer security and technical support services.

According to the complaint, the Help Desk companies operated as an interrelated network, including named defendants Big Dog Solutions LLC, PC Help Desk US LLC and Inbound Call Specialist LLC — all based in Florida — in addition to Nevada-based BlackOptek CE Inc., Canada-based 9138242 Canada Corp. and Iowa-based Digital Growth Properties LLC.

After using pop-ups to mislead consumers into believing their computers may have been compromised by malware or hackers, the Help Desk companies gained consumers’ trust by claiming they were authorized by Microsoft Corp. or Apple Inc., the complaint said.

After running purported tests, the Help Desk companies charged consumers $200 to $400 for their technical support services and, in many instances, would “use the fear they have created” to sell ongoing technical support ranging from about $10 to $20 per month, the complaint said.

The FTC also announced Friday that it sought criminal charges against seven individuals associated with the Florida-based scammer Client Care Experts LLC, two of which pled guilty for allegedly defrauding more than 40,000 consumers nationwide out of more than $25 million.

"Tech support scams prey on people's fear of losing important work, family photos or sensitive identification information," said Florida Attorney General Pam Bondi at a Friday news conference in Tampa. "These scams will not be tolerated in Florida and that is why we are bringing more cases against more tech support scammers than any other state in the country, in an effort to protect consumers and recover money for victims."

The FTC has also settled with Click4Support LLC for $554,000, and the agency got a $27 million default settlement with Click4Support's subsidiary iSource USA LLC.

In order to stave off further scams, the FTC said it has also attempted to spread awareness of IT support fraud among consumers by modernizing its education tools and scheduling discussions among law enforcement and businesses targeted by scammers later this year. It has also looked beyond U.S. borders for significant sources of tech support scams, cooperating with authorities in India.

The government is represented by James Davis and Matthew H. Wernz of the FTC and Michelle Pardoll of the Florida Attorney General’s Office.

The defendants are represented by Joe M. Grant and Ruben E. Socarras of Marshall Socarras Grant PL, Robert Buschel of Buschel Gibbons PA and Fred A. Schwartz of Kopelowitz Ostrow Freguson Weiselberg.

The case is Federal Trade Commission et al. v. Big Dog Solutions LLC et al., case number 1:16-cv-06607, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Nicole Narea. Editing by Alyssa Miller and Breda Lund.

https://www.law360.com/articles/923753/tech-cos-to-pay-nearly-10m-in-malware-scam-crackdown