ByteHosting Settles with the FTC in Scareware Advertising Lawsuit

ByteHosting Internet Services LLC and its CEO, James M. Reno, have settled with the Federal Trade Commission (FTC), after being sued for participating in a major scareware advertising operation. The order involves a $1.8 million judgment, a permanent injunction and a promise to cooperate with the prosecution.

Back in December 2008, a judge issued a temporary restraining order, after the Federal Trade Commission filed a complaint against Innovative Marketing, Inc. of Belize and ByteHosting Internet Services, LLC of Ohio, along with James Reno, Sam Jain, Daniel Sundin, Marc D'Souza, and Kristy Ross, for engaging in unfair business practices.

The defendants were accused of using scare tactics to advertise and sell fake security applications, commonly referred to as rogueware. James Reno and his company, ByteHosting Internet Services, were particularly accused of providing various services to Innovative Marketing while being fully aware of their illegal activities.

After failing to appear in court by 12 December, the judge threatened to issue arrest warrants. Reno claimed that he couldn't make the trip to the courtroom in Baltimore, because all of his assets were frozen.

On March 11, 2009, a final order, entitled "Stipulated Final Order for Permanent Injunction and Monetary Judgment As To Defendants James M. Reno and Bytehosting Internet Services, LLC," was sent for approval to the Director of the Bureau of Consumer Protection and, subsequently, to be subjected to a vote by the full Commission.

The Maryland Daily Record reports that, last Friday, the order fully went into effect. According to it, Reno did not admit liability, but settled for the $1.8-million judgment, which will be suspended if ByteHosting pays a tax bill of $17,827 to the IRS and the funds in four bank accounts, totaling around $100,000, are forfeited to the FTC.

This is not the first time when Reno and his company face such charges. Back in 2004, Reno and Sam Jain, who is also a defendant in the FTC lawsuit, settled with Symantec, after the vendor sued them for illegally using its trademarks and intellectual property. The details of the settlement between Reno and Symantec have not been disclosed.