Operators of Phony ‘Free $1,000 Gift Card’ Websites Will Pay $2.5 Million in FTC Settlement

February 18, 2014

Your Better Business Bureau has fielded calls from local consumers for several years regarding text messages promising different gift cards.  The FTC released information today of successful work they have done in these cases.

Twelvedefendants that allegedly operated websites enticing consumers with bogusoffers of “free $1,000 gift cards” for major retailers have agreed to pay $2.5million in settlements withthe Federal Trade Commission.

In anamended complaint filedwith the settlements, the FTC alleged that the South Carolina- andCalifornia-based corporatedefendants hired affiliate marketers to send millions of spam text messages toconsumers around the country. With links to the defendants’sites, the messages included text such as, “Dear Walmart shopper, your purchaselast month won a $1000 Walmart Gift Card, go to [website address] within 24hours to claim.”

“Thiscase halts a nationwide operation that took in millions of dollars by promisingconsumers free gift cards that it never delivered,” said Jessica Rich, Directorof the Bureau of Consumer Protection. “We’re pleased to stop these unwantedmessages and protect consumers’ personal information.”

Whenconsumers clicked on the links in the spam text messages, they were taken tolanding pages operated by one group of defendants that asked them to “register”for the free prizes they had been offered. The registration process, thecomplaint alleges, was actually a method by which the defendants collectedinformation about the consumers that was then sold to third parties.

Onceconsumers provided this information, they were taken to sites owned by anothergroup of defendants. On these sites, consumers were told that to win the prizethey had been offered, they were required to complete a number of “offers,”many of which involved either paid subscriptions to services, or applying forcredit. The complaint alleges that the defendants were paid by the companiesthat advertised these offers.

Under the FTCsettlements all the defendants will be banned from beinginvolved in the distribution of unwanted spam text messages, as well as frommisrepresenting whether a good or service is “free,” or whether a consumer haswon a contest or prize. They are also banned from misleading consumers aboutwhy they are collecting consumers’ personal information, whether theinformation will be sold, or the extent to which they will protect consumers’privacy. The defendants also are prohibited from using consumers’ personalinformation collected through the scam, and must destroy that information afterCourt approval of the settlements.

Thesettlements also will require the defendants to give up the full amount ofmoney they made as a result of the scam, as follows:

·       All Square Marketing, LLC;Threadpoint, LLC; PC Global Investments, LLC; Slash 20, LLC; Matthew Cook,Robert Nicolosi, Christopher McVeigh, and Michael Mazzella are required to giveup $1,320,000.

·       SubscriberBASE Holdings,Inc.; SubscriberBASE, Inc.; Jeffery French and Jason Liester are required togive up $1,180,000.

TheCommission vote approving the proposed stipulated final judgments, along with arevised complaint that added Cook, Nicolosi, and Liester as defendants anddismissed former defendant Brent Cranmer, was 4-0. The U.S. District Court forthe Northern District of Illinois, Eastern Division, approved and signed thestipulated final judgments on February 6, 2014.

NOTE: Consent decrees have the force of law when approved and signedby the District Court judge.