Why Fraud Pays

Why do people continue to do fraud? Because it pays well, often even if you’re caught. Take for example this case over at Bruce Schneier’s blog:

Here’s one scareware operator who sold “more than 1 million software products” at “$39.95 or more,” and now has to pay $8.2 million to settle a Federal Trade Commission complaint.

A man was in charge of an Internet scam where a pop-up appears in your web browser informing you that your computer is infected with some kind of malicious software. These pop-ups then try to get you to purchase software that will disinfect your machine. The problem is these are scams and no reputable anti-malware developer would use such tactics (as it would be the end of their business likely). The software author charges a said amount for the software (in this case $39.95) and that’s that.

Well if you have 1 million customers who paid you $39.95 and are required to pay the FTC $8.2 million you’re only paying $8.20 per sucker leaving you with $31.75 in profit for each person who fell for your scam. That’s a pretty good profit.

According to the story the FTC will use the money to pay back the customers who were suckered into the deal. If this is the case that means each sucker will not be getting all of their money back (we’ll call this a fine for being dumb) or their reimbursement will be subsidized by tax money (which would be a horrible idea). Honestly I’m betting money the FTC never gets around to paying those suckers back.

Let this story also be a lesson to you, don’t fall for scams that claim your system is infected.