FTC Cracking Down on Scams using “Free” Trail Offers

The Federal Trade Commission is cracking down on online marketing scheme’s using “Free” Trail offers as a way to scamming consumers of their money. A federal court stopped an online operation that allegedly stole more than $450 million from consumers in the US and other countries at the request of the FTC. The alleged ringleader, Jesse Willms and 10 companies he controls, has had all assets frozen pending trail.

Federal Trade Commission, Plaintiff v. Jesse Willms; Peter Graver; Adam Sechrist; Brett Callister; Carey L. Milne; 1021018 Alberta Ltd., also d/b/a Just Think Media, Credit Report America, eDirect Software, WuLongsource, and Wuyi Source; 1016363 Alberta Ltd., also d/b/a eDirect Software; 1524948 Alberta Ltd., also d/b/a Terra Marketing Group, SwipeBids.com, and SwipeAuctions.com; Circle Media Bids Limited, also d/b/a SwipeBids.com, SwipeAuctions.com, and Selloffauctions.com; Coastwest Holdings Limited; Farend Services Ltd.; JDW Media, LLC; Net Soft Media, LLC, also d/b/a SwipeBids.com; Sphere Media, LLC, also d/b/a SwipeBids.com and SwipeAuctions.com; and True Net, LLC, also d/b/a Selloffauctions.com, Defendants.

The scheme allegedly lured consumers into “free” or “risk-free” for various products online, including acai berry weight-loss pills, teeth whiteners, and health supplements containing resveratrol (the supposedly healthful ingredient in red wine), as well as for a work-at-home scheme, access to government grants, free credit reports, and penny auctions. Consumers were often charged for the “free” trial plus a monthly recurring fee, typically $79.95. Consumers were also charged monthly recurring fees for the so-called bonus offers. Thus providing false or misleading information to merchant banks in order to acquire credit and debit card processing services.

Pending trial a preliminary injunction bans the defendants from selling products or services that feature a “negative option,” in which the seller interprets consumers’ silence or inaction as permission to charge them, or “continuity plan” in which consumers are sent regular shipments of merchandise until they cancel. The preliminary injunction also prohibits the defendants from offering any products as a “free trial” or “bonus”; misrepresenting costs of a product or any cancellation policy; failing to disclose the amount and timing of fees and the terms and conditions of any refunds; making misrepresentations about the benefits or safety of products; misrepresenting any product endorsement or testimonial; and charging consumers without their express consent.

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The court found that the FTC showed enough evidence in the case to justify freezing the assets of Willms and his companies. It stated, “Not only has [the FTC] shown a likelihood that Defendants have engaged in misleading marketing practices, but it has also shown that Defendants have moved substantial funds to offshore companies and bank accounts…” Willms admitted to opening an account in Cyprus to facilitate international merchant banking. This account was also possibly created for the purpose of hiding Willms assets.

The FTC recently filed an amended complaint adding two defendants to the action, Elizabeth Graver and Mobile Web Media LLC, a company Graver allegedly established to help Willms acquire credit and debit card processing services. – Source

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