Online Fraud Scammed Consumers Out of Nearly Half a Billion Dollars
Jesse Willms and 10 of his companies, the FTC charged, defrauded consumers out of more than $450 million by enticing them with "free" or "risk free" offers that required them to divulge credit card numbers -- which Willms then used to charge them for unwanted products and services."The defendants used the lure of a 'free' offer to open an illegal pipeline to consumers' credit card and bank accounts," David C. Vladeck, Director of the FTC's Bureau of Consumer Protection, said in a statement. " 'Free' must really mean 'free' no matter where the offer is made."
Most of the defendants are based in Alberta, and the FTC worked with Canadian law enforcement to investigate the international online crime ring. "Internet fraud is a global problem that requires an international enforcement response," Lisa Campbell, the deputy commissioner of competition for the Competition Bureau of Canada, said in a statement. "International cooperation ensures that fraudsters can't hide behind borders."
Willms and his companies, the FTC's charged, hoodwinked consumers via "free trials" for an assortment of products he peddled online, including acai berry weight-loss pills, teeth whiteners and health supplements. Other sites controlled by Willms targeted victims with a variety of traditional online scams, sites including work-at-home schemes, access to government grants, free credit reports and penny auctions.
These "free" or "risk free" offers came with a catch -- small shipping and handling fees -- that required consumers to provide their credit or debit card numbers. The victims' cards were then charged without their knowledge for the "free" trial, as well as a hefty recurring monthly fee, usually $79.95. The scam also enticed consumers with promises of "bonus" offers, for which they were also charged recurring monthly fees.
The defendants' penny auction offers promised consumers free "bonus" bids, but those who volunteered their credit or debit card numbers for future auctions ended up getting nailed with charges they were not told of, including $150 for introductory "bonus" bids and $11.95 per month for ongoing "bonus" bids.
The FTC also accused the defendants of hiring marketers whose banner ads, pop-ups, sponsored search terms and unsolicited e-mail helped drive consumers to their crooked websites. And these affiliate marketers received a piece of the action for each credit or debit card charged.
As the scale of the international scam mounted, the complaint said, the defendants supplied merchant banks with false and misleading information to obtain credit and debit card processing services to cope with rising chargeback rates and consumer complaints.
The defendants were also accused of:
- Offering money-back guarantees designed to make it difficult to cancel charges or receive refunds.
- Making false claims about the cost of products, recurring charges and the availability of refunds.
- Burying crucial terms and conditions in reams of fine print.
- Making false weight loss and cancer cure claims for their products.
- Publishing fake endorsements by Oprah Winfrey and Rachael Ray.
- Violating the Electronic Fund Transfer Act by debiting consumers' bank accounts without their signed, written consent and without providing consumers a copy of the written authorization.
The defendants named in the FTC complaint are Jesse Willms, Peter Graver, Adam Sechrist, Brett Callister, Carey L. Milne; 1021018 Alberta Ltd., also doing business as Just Think Media, Credit Report America, eDirect Software, WuLongsource and Wuyi Source; 1016363 Alberta Ltd., also doing business as eDirect Software; 1524948 Alberta Ltd., also doing business as Terra Marketing Group, SwipeBids.com and SwipeAuctions.com; Circle Media Bids Limited, also doing business as SwipeBids.com, SwipeAuctions.com and Selloffauctions.com; Coastwest Holdings Ltd.; Farend Services Ltd.; JDW Media LLC; Net Soft Media LLC, also doing business as SwipeBids.com; Sphere Media LLC, also doing business as SwipeBids.com and SwipeAuctions.com; and True Net LLC, also doing business as Selloffauctions.com.
The FTC encourages consumers to learn about the hidden costs in "free trial" programs by watching the video, Free Trial Offers, below. The video shows you how to check out a free trial and as well as what to do if you discover you've been enrolled in a free trial offer without your permission and find yourself being charged for unwanted merchandise. The video is also available on YouTube. For more FTC information on free trials, click here.