OptinRealBig Files Chapter 11

Citing a contested $20 million debt to Microsoft as its biggest unsecured liability, self-described “Spam King” Scott Richter’s email marketing firm, OptinRealBig.com, has filed for Chapter 11 bankruptcy in a Colorado federal court.

Chapter 11 bankruptcy would allow OptinRealBig to keep lawsuits at bay while it reorganizes its finances and continues to operate. Any proposed reorganization would have to be accepted by a majority of its creditors.

Microsoft sued OptinRealBig.com in conjunction with New York Attorney General Eliot Spitzer in December of 2003. The ongoing suit accuses the company of being part of a network that hijacked computers and used them as drone machines to send billions of illegal and deceptive spam messages. Richter settled with the New York AG’s office for $50,000 in July of 2004 without admitting any wrongdoing.

“I wouldn’t use the word angry, but I think I’m more disappointed in the system because of the length of time it takes to ever get to a decision in these cases, especially when you have a company with resources like Microsoft,” said Steven Richter, legal counsel for the company and Scott Richter’s father. “Who can take them on for so long?”

Microsoft, for its part, says it’s pleased with the bankruptcy filing.

“At that time [when we filed the lawsuit], you’ll recall that both Microsoft and General Spitzer said this action was intended to drive him into bankruptcy, and that’s exactly what has happened,” said Aaron Kornblum, Internet safety enforcement attorney at Microsoft. “There’s still work to be done….We intend to pursue the amounts owed to Microsoft under Washington law as a part of the bankruptcy process.”

What really brought the situation to a head, Richter said, was a separate legal battle with American Family Mutual Insurance, OptinRealBig’s insurer. According to Richter, the insurance firm is seeking a legal decision that would let it extricate itself from paying for OptinRealBig’s defense.

“With that lawsuit, on top of the Microsoft lawsuit, on top of two or three others around the country, it was thought we could bring it all into one court,” said Richter.

Despite the attempted launch of a line of “Spam King” clothing, court filings show OptinRealBig has repeatedly denied sending unsolicited email.

Other creditors named in OptinRealBig’s filing include clients of Denver Snuffer, a Utah attorney who has made headlines filing class-action lawsuits against alleged spammers in that state.

The next step in the case is for OptinRealBig to finish filing all of the documents required for a bankruptcy proceeding to begin. Microsoft says it will make a decision on its next move after it examines all of the documents.

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