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Today, March 23, New York's Attorney General Eliot Spitzer filed suit against Gratis Internet , the 'brains' behind the Freepay Freeipods.com pyramid marketing schemes, alleging the company massively violated its privacy policy by selling its customer database to three marketing companies in 2004 and 2005.
All told those 3 companies, namely Datran Media, JDR Media (a spammer whose website registration info is incorrect and whose contact info is broken) and Jumpstart Technologies (best known for spamming the world with fake e-crush emails iin 2002) bombarded Gratis's 7 million customers with close to 350 million spam messages.
Spitzer is seeking enough money that its clear he's trying to put these lying bozos out of business permanently.
Specifically he wants, at minimum, $500 for each New York state resident the company sold out, which would conservatively work out to something around $10 million.
The move against Graits was widely expected since Spitzer announced just last week that it had settled with Datran for $1.1 million for buying and spamming the list despite knowing that the list was protected by a privacy policy.
Last week, Datran's paid shill portrayed Datran as a patsy caught in the crossfire to a number of media outlets, including Red Herring and myself, but today's lawsuit makes clear that Datran bought the emails, noticed the privacy policy and then ASKED Gratis to change it retroactively. (Lovely, lovely work by Datran employee Susan Weiner.)
For those of you unfamiliar with Gratis, the company, which started in 2000, made a splash in 2004 promising and sometimes delivering free ipods to rubes willing to sign up for promotional offers from the likes of CitiBank and Blockbuster and then convince 5 of their friends that they too could get a free ipod if they signed up and got five of their friends to sign up. (More detailed explanation here and here and here)
The result -- a bunch of overly credulous reporters deemed the site legitimate and the internet soon became inundated with pleas from free-lunch believing rubes looking for other free-lunch-believing rubes.
Gratis Internet co-founders Peter Martin and Rob Jewell and their paid PR flack/apologist (from the ostensibly top tier firm Flieshman-Hillard) repeatedly swore up and down to me, Leander at Wired News and anyone else that would listen that Gratis wasn't in the business of spamming people.
According to the AG's lawsuit (.pdf), Martin and Jewell are just a pair of greedy liars.
After explicityly promising consumers that it would never "give out," "provide" or "sell, rent or loan" their information to anyone - including to its "business partners" -- Gratis did just that, for a quick payday.
Notably, Gratis's website's were "certified" by TRUSTe, a "non-profit" third party that certifies privacy policies. The lawsuit raises some VERY interesting questions about this group, (something I'll reserve for another post), but, suffice it to say here, that the new info adds more credence to my conculsion that TRUSTe's logo isn't worth the pixels it is printed with.
Martin and Jewell each made between $1.5 and $3 million in 2004, but only a small percentage, some $430,000, of Gratis's revenue came from the spam contracts, according to Spitzer's lawsuit (second .pdf).
That's really funny, because Spitzer now wants all of it. Not half, Eddie. All of it.
According to the lawsuit, all of the money that "ethical" companies like CitiCorp and Blockbuster paid for customer leads (~$20 to $70 per lead) is tainted by the scam, since Gratis customers would not have signed up if they knew they were going to have their information, including home addresses and IP addresses, sold to spammers like Datran.
Gratis unjustly earned several million dollars in commissions from third parites, by providing those parties with consumers for promotions even though the consumers were deceptively promised that Graits would not share their infromation.
So it looks like Mr. Peter Martin and Robert Jewell's desire to make a few more bucks by selling their customer database to spammers may mean they have to give up all of their earnings to New York's crusading AG, not just the money they made from selling out netizens to spammers.
Could not have happened to a better bunch of greedy scammers.
Oh, and adding to the schadenfreude, some emails I recieved today which included the phrase "class action" indicate that Spitzer isn't the only lawyer interested in suing Mr. Jewell and Mr. Martin for all of their money.
Technorati Tags: gratis, spitzer, freepay, freeipods.com, peter martin, rob jewell, datran, jumpstart technologies, , truste, Flieshman-Hillard, spam, privacy
Posted by Ryan Singel at March 23, 2006 11:17 PM
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It would be so unfair to forcibly make Freepay go bankrupt only to recompensate some people from New York. The world is bigger than the state of New York, also the world of Freepay.
Here in Germany we also have thousands of people who signed up and struggle to get others to subscribe to Freepay. I for instance have already about 200 people for the laptop. You can see it at http://www.laptop-kostenlos.tk/.
Until now only seven of the 200 accepted an offer but I am on a very good way to get the laptop. If these lawyers will destroy the company this was all in vain.
Freepay should be forced to survive and go on like before, but without selling their costumers information. Maybe they sold our German data too? Who thinks of the people outside the state of New York?
By the way: Please sign up at EDITED and accept an offer! I still need some of the "Greens" who accepted the offer to get my free laptop.
EDITORS NOTE: While anyone with anything to add to the conversation is free to leave comments here, affiliate spam, especially that for FREEPAY sites, is not kosher.
Posted by: Laptop Kostenlos at March 24, 2006 02:44 PM
Spam email is not that big of a deal. I expected it when I signed up, so i used a second email. I actually only have 400 spam in my folder from the past 5 months, and 0 in my inbox. I actually dispise both freepay and this lawyer, because his suit just made Freepay go down in flames. They havn't sent 1 item or approved one form since changing there TOS due to this lawsuit. This means that everyone who worked hard to get there free gift (especially the xbox 360) are now screwed. Also I cought there customer service in a lie, they told me they didnt recieve my order form, when usps confirmed delivery 10 days earlier.All i have to say is I'ved lost all trust in freepay, and will move on to a different company like trainn or OC (who i used to hate). This whole ordeal sickens me....
Posted by: ps at March 29, 2006 05:30 PM
You realize that this post makes your liable for slander don't you?
Noah
Posted by: Noah Robinson at April 10, 2006 08:24 PM