$2M from nothing
Date: April 07, 2004Source: Computer Crime Research Center
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At a minimum, 27,000 of site owners may have been victims of the domain scam invented by an enterprising businessman Darren Morgenstern. Each of them paid $70 to get rid of network swindlers. But they didn't kmow that the only swinlder was Darren Morgenstern himself.
The scheme of his scam was simple and efficient. A regular victim received unsolicited fax solicitations stating, "URGENT NOTICE OF IDENTICAL DOMAIN NAME APPLICATION BY A THIRD PARTY." The letterhead identifies the sender as either Electronic Domain Name Monitoring or Corporate Domain Name Monitoring. The solicitation warns that an application for a domain name almost identical to the recipient's has been "submitted to the National Domain Name Registry (NDNR) for registration," by an unidentified third party. For example, the owner of a site "www.reuters.org" was told that an application had been submitted to obtain the domain name "www.reuters.net" The solicitation says, "Consequently, it is our opinion that this application may have been submitted in bad faith. . .." The solicitation lists four reasons someone might want a copy-cat domain name, including "disrupting the business of a competitor," or intentionally attempting to lure someone else's customers by creating a confusingly similar Web address. The fax solicitation offers to block the application by obtaining the copy-cat domain name for the fax recipient for a fee of $70. It warns that, if the consumer fails to act, "NDNR WILL NOT BE LIABLE FOR THE LOSS OF DOMAIN NAME LICENSE, IDENTICAL OR CONFUSINGLY SIMILAR USE OF YOUR COMPANY'S NAME; OR INTERRUPTION OF BUSINESS ACTIVITY OR BUSINESS LOSSES."
Indirect costs were almost zero despite of usual cybersquatting (taking domain names conformable to "famous" names). And as distinct from these cybersquatters, Darren asked not thousands or millions of dollars, but a rather small amount of money. Therefore many companies many paid.
The swindler had managed to raise about $2M before The Federal Trade Commission of the USA became interested in his activity.
The Federal Trade Commission has asked a U.S. District Court Judge to halt an Internet domain name scheme that dupes consumers into needlessly registering variations of their existing domain names.
The FTC has asked the court to issue preliminary and permanent injunctions to bar the deceptive marketing practices, to freeze the defendants' assets to preserve them for consumer redress, and to shut down Web sites used to promote the domain name scheme.
The defendants named in the FTC suit are Darren J. Morgenstern, 1268957 Ontario, Inc., and 1371772 Ontario Inc., doing business as National Domain Name Registry, Electronic Domain Name Monitoring, and Corporate Domain Name Monitoring. The companies are based in Toronto, Canada, with an office in Atlanta, Georgia.
The Commission vote to file the complaint was 5-0. It was filed in U.S. District Court for the Northern District of Georgia, Atlanta Division, yesterday.
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