FTC Settles With 'Free iPhone' Spammer, Suspends $60,000 Fine

A Georgia resident who allegedly sent millions of people deceptive SMS messages offering free iPhones has settled Federal Trade Commission charges by agreeing to refrain from sending text spam in the future.

The FTC also fined Henry Nolan Kelly $60,950 -- the amount he allegedly earned from the spam campaign -- but suspended the penalty because Kelly is unable to pay.

The settlement stems from allegations that Kelly sent 20 million people text messages promising material like free iPhones and gift cards, while leaving out key terms of the deal. The messages contained a link to sites run by other companies, which then required consumers to “complete an offer” -- such as by paying a fee, or applying for a credit card --  in order to receive the phone, according to the FTC.

“The consumer usually must complete over 10 offers,” the FTC said in its complaint against Kelly, filed in February. “In most cases, completing an offer entails paying money or incurring some other detriment, such as qualifying and applying for credit cards.”

The FTC also said in its complaint that consumers were required to disclose personal information -- including names, addresses and phone numbers -- in order to receive the supposedly free merchandise.

The agency alleged that the messages were deceptive because they failed to “clearly and conspicuously disclose that consumers must incur expenses or other obligations to obtain the promised free merchandise.”

The settlement agreement was approved last week by U.S. District Court Judge Thomas Thrash in Atlanta. If Kelly violates the order, he potentially could face contempt charges.
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