According to the FTC, the defendant, a Canada man with offices in Ontario and Atlanta, convinced more than 27,000 consumers to register variants of their domain names through his company at US$70 a pop.
FTC attorney Catherine Harrington-McBride told Newsbytes that the alleged scammer would send faxes to registered domain name holders warning them that an undisclosed third party had attempted to register a close variant of their Internet address in "bad faith."
A typical fax from the company might warn the owner of newsbytes.com that another consumer had "applied" to buy newsbytes.org, possibly with bad faith intent. In the fax, the defendant's company would then offer to block the purchase by instead acquiring the domain name variant for the consumer targeted in the scam.
Although the defendant appears to have actually made good on his promise to buy the names in question, Harrington-McBride points out that there is no way for any party to monitor domain name "applications" in the manner represented by the defendant in his fax pitch.
Since Internet domain name registrations in top-level Internet domains like .com, .org and .net are virtually instantaneous for anyone with a credit card, the defendant's warning about a mythical application period was obviously bogus, Harrington-McBride said.
Although the FTC still hasn't sorted out all the details in the case, the agency believes the defendant bought the domain names through an Internet registrar that offers discounts on bulk registrations, Harrington-McBride said.
The defendant would then pocket the difference between the US$70 retail rate he charged consumers and the discounted rates he paid the Internet registrar.
While it is perfectly legal for non-accredited Internet registrars to sell domain names as middlemen, the defendant violated federal "false inducement" regulations in his sales pitch, Harrington-McBride said.
According Harrington-McBride, the defendant, who did business as National Domain Name Registry, Electronic Domain Name Monitoring and Corporate Domain Name Monitoring, probably bilked many more than the 27,000-odd defendants the FTC charged him with scamming.
The FTC identified 27,000 victims of the case who used one of the three credit cards that the defendant accepted. Since the defendant also accepted checks, the true number of victims in the case could be far higher, Harrington-McBride said.
The FTC will seek to shut the alleged scammer down permanently and will try win redress for the victims of the scam, Harrington-McBride said.
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