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

In an amended complaint filed with the settlements, the FTC alleged that the South Carolina- and California-based corporate defendants hired affiliate marketers to send millions of spam text messages to consumers around the country. With links to the defendants’ sites, the messages included text such as, “Dear Walmart shopper, your purchase last month won a $1000 Walmart Gift Card, go to [website address] within 24 hours to claim.”

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

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

Once consumers provided this information, they were taken to sites owned by another group of defendants. On these sites, consumers were told that to win the prize they had been offered, they were required to complete a number of “offers,” many of which involved either paid subscriptions to services, or applying for credit. The complaint alleges that the defendants were paid by the companies that advertised these offers.

Under the FTC settlements all the defendants will be banned from being involved in the distribution of unwanted spam text messages, as well as from misrepresenting whether a good or service is “free,” or whether a consumer has won a contest or prize. They are also banned from misleading consumers about why they are collecting consumers’ personal information, whether the information will be sold, or the extent to which they will protect consumers’ privacy. The defendants also are prohibited from using consumers’ personal information collected through the scam, and must destroy that information after Court approval of the settlements.

The settlements also will require the defendants to give up the full amount of money 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 give up $1,320,000.
  • SubscriberBASE Holdings, Inc.; SubscriberBASE, Inc.; Jeffery French and Jason Liester are required to give up $1,180,000.

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

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

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Contact Information

Mitchell J. Katz
Office of Public Affairs

Matthew Wernz
FTC Midwest Region, Chicago