3FN Ordered Closed; Assets to Be Sold by Receiver

May 19, 2010 2:30 PM PST
SAN JOSE, Calif. — Computer servers and other assets owned by 3FN.net parent Pricewert will be sold by a court-appointed receiver, a federal judge has ordered.

In addition, U.S. Judge Ronald Whyte ordered that the web-hosting company — which also operated the Triple Fiber Network, APX Telecom and APS Communications — be permanently closed and for its operators to turn over $1.08 million in illegal profits to the FTC.

"These experts had analyzed data derived from Internet searches which establish that defendant, an Internet service provider, was engaged in widespread illegal activity," Whyte wrote. "There seems to be little doubt from the information provided that Pricewert functioned primarily as an internet service provider for illegal activity."

There were a "relatively small number of apparently legitimate customers" of the company, wrote Whyte, who last year ordered the ISP’s upstream providers and data centers to disconnect the company's servers from the Internet.

The FTC last year charged that 3FN actively recruited criminals to distribute spyware, viruses, Trojan horses, phishing emails and porn featuring children and animals. The company advertised its services in a variety of underground sites, including a chat room for spammers.

Regulators also alleged that the distribution of illegal and malicious content and deployment of botnets compromised thousands of computers. The FTC said that 3FN operated large botnets and recruited bot herders to run the networks of compromised computers.

The FTC said that transcripts of IM logs show the company's senior executives discussing the configuration of botnets with bot herders. More than 4,500 malicious software programs were controlled by command-and-control servers hosted by 3FN.

The FTC shut down the company through an injunction in July, costing hundreds of its clients grief and loss of income.

One adult company that was affected by the FTC's July shutdown was the parent company of of ETU-Cash.com and Cash.Pornocruto.es.

New Concept Business, which operates the two affiliate programs and nearly two dozen adult websites with mostly sexual role-playing fantasy themes, was confronted with inoperable and truncated websites, destruction of webmaster program relationships and loss of funds from chargebacks and refunds.

New Concept Business said at the time it lost about $5,000 a day after the shutdown because most of its contents was hosted on its Pricewert's servers. It later was able to repair all of its websites' operations.

Whyte, in the $1.08 million forfeiture ruling against Pricewert, said that the company "has knowingly refused to participate in this litigation and it should not benefit nor be in a position to complain about the weakness of the FTC's calculation when it has failed to supply the records it was ordered to provide."

Whyte also pointed to evidence that suggests Pricewert was hosting illegal activities.

"The number of IP addresses controlled by defendant that are affiliated with illegal activity appears to far outnumber the IP addresses of legitimate customers using Pricewert's services," he wrote. "An estimate that over half of the users were connected with illegal activity seems extremely conservative."

But Whyte noted that Pricewert had a handful of legitimate clients like New Concept Business, which suffered as a result of the injunction against Pricewert.

"[T]here was a relatively small number of apparently legitimate customers who used Pricewert as their service provider," he wrote. "This came to the court's attention when some of those customers contacted the court after the Pricewert servers were shut down.

"Therefore, it seems clear that a portion of the monthly profits of $30,000 reportedly realized by Pricewert were realized from legitimate business activity."

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