Spam deluge nearly sinks Bellevue e-hosting business

A Bellevue company that has been trying to protect residential and business Internet users from unsolicited commercial e-mail likely was targeted by a major spam operation for that very reason, its founder said yesterday.

Lee Wright said ModoMail is still struggling to survive after being besieged by forged e-mails — at one point receiving 300 a second, clogging his system.

By Peter Lewis
Seattle Times consumer-affairs reporter

http://seattletimes.nwsource.com/html/businesstechnology/2001916232_modomail30.html

Messages hawking bogus diet patches and penis enlargement pills were bouncing to ModoMail because they were sent to undeliverable e-mail addresses. The "from" and "reply to" fields had been manipulated to make it appear as if they’d come from ModoMail, Wright said.

According to federal authorities, ModoMail was one of hundreds, possibly thousands, of businesses around the country harmed by spammers who forged Internet address information in the messages to disguise their origin.

On Wednesday, federal authorities charged four Detroit-area men in connection with the fraud. They became the first to face criminal charges under the new U.S. Can Spam Act.

Christopher Chung and Mark Sadek were arraigned in Detroit and released on bond. Two other defendants, Daniel J. Lin and James Lin, have volunteered to surrender by today, said Jeffrey Collins, the U.S. attorney in Detroit.

Separately, the Federal Trade Commission has filed a civil case against Phoenix Avatar, the company the defendants are accused of running.

Yesterday, Wright, 30, of Redmond, said he spent two years developing his e-mail hosting business and put it into motion last year. He said he has fewer than 10,000 subscribers, that 70 to 80 percent are residential users, and the rest are businesses looking to cut down on spam.

Wright figures that spammers decided to target his company because it is an anti-spam service. Steve Wernikoff, a Chicago-based FTC attorney, says Wright’s theory is reasonable.

"We can’t get into the heads of the people sending the e-mail messages, but that’s certainly a viable theory," Wernikoff said.

ModoMail was among the businesses that received millions of forged messages sent by Phoenix Avatar and a second alleged big-time spam operation known as Global Web Promotions, Wernikoff said.

The FTC received almost 500,000 complaints about Phoenix Avatar, suggesting that "significant times more than that were actually sent," Wernikoff said.

The strain the spam put on Wright’s equipment interfered with his ability to provide service, he said, causing some customers to complain and leave.

"Our customer retention is at an all-time low," Wright said in a recent court document.

Also troubling, Wright said, is the cost to his company’s reputation. Some anti-spam groups have added ModoMail to their "black lists." That prevents ModoMail subscribers from sending e-mail to any address or service that subscribes to such lists, Wright said.

Wright hopes ModoMail can survive.

"We’re not giving up," Wright said. "We’re pretty close to month-to-month at this point."

Information from Bloomberg News is included in this report.

Peter Lewis: 206-464-2217 or [email protected]

Copyright © 2004 The Seattle Times Company