An app developer tricked consumers into downloading a "rewards" application that actually loaded mobile phones with malicious software to mine virtual currency for the developer, the Federal Trade Commission charged in a new action.
The agency's latest foray into FinTech enforcement involved Ohio-based Equiliv Investments and owner Ryan Ramminger. In February 2014 the defendants launched the Prized app, which claimed that consumers could earn points for playing games and then use the points on rewards such as clothes or gift cards.
In reality, Prized was a "Trojan horse" that contained malware that once loaded onto a consumer's smartphone "hijacked" the device's resources, the FTC and the New Jersey Attorney General said, in order to mine for virtual currencies such as DogeCoin, LiteCoin, and QuarkCoin. And many consumers never got their points, either.
The mining—harnessing users' devices to solve complex mathematical equations more quickly to generate the cryptocurrency—drained both consumers' smartphone batteries as well as their data plans, the AG and the agency added. Nowhere did the defendants disclose to users the existence of the "malware in their app capable of turning users' devices into virtual currency miners," according to the complaint.
To settle charges of violations of both the Federal Trade Commission Act and the New Jersey Consumer Fraud Act, the defendants agreed to a permanent ban on the creation and distribution of malicious software. A monetary judgment of $50,000 was partially suspended upon a $5,200 payment to the state of New Jersey, and the defendants promised to destroy any consumer information that was collected through the marketing and distribution of the app.
To read the complaint and stipulated order in FTC v. Equiliv Investments, click here.
Why it matters: The case demonstrates the FTC's continuing focus on new and emerging financial technology, or FinTech, and follows the FTC's first case involving crowdfunding, where the Commission settled with a defendant who raised money through a Kickstarter campaign ostensibly to produce a board game, only to spend it on himself.