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`EXHIBIT A
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`EXHIBIT B
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`EXHIBIT C
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`EXHIBIT D
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`‘Like Cutting Off a Limb to Save the Body’
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`This author has spent many years chronicling the exploits of black hat spammers who use hacked
`computers to relay junk email. But I’ve dedicated comparatively little time delving into ways of
`email marketers who technically follow U.S. anti-spam laws yet nevertheless engage in spammy
`practices. The latter is able to ply their trade because there are thousands of Internet hosting
`companies operating on thin profit margins that are happy to host spammy but lucrative clients.
`This is the story of how one hosting company heroically kicked out all of its email marketing
`customers at great expense and ended up building a stronger, more profitable company in the
`process.
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`A serial entrepreneur as a young teenager, Peter Holden
`founded several online companies by the time he turned 20 and started Tulsa, Okla.-based hosting
`firm HostWinds. The company grew modestly but steadily — relying on more than two dozen
`servers and bringing in revenues of about $15,000 per month.
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`That is, until Holden got his first email marketing client who offered to double HostWind’s monthly
`income in one day.
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`“I remember driving down from Tulsa to Oklahoma City to visit this client,” said Holden, now 25.
`“It was July 2012, and it was super hot in the car because I didn’t have air conditioning. But I
`remember thinking it was really cool to have a client who was local and interested in using our
`services.”
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`That one client’s business would not only double HostWind’s income, but it gave the company
`much-needed funds to invest in building out the firm’s technical infrastructure. Good thing, too,
`because the email marketing client soon referred more e-mailers to HostWinds, which was
`forced to petition the American Registry for Internet Numbers (ARIN) for thousands of
`additional Internet addresses to accommodate its new clientele.
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`“Fast forward about two years, and we now have a lot of mailers on our network,” Holden said.
`“Throughout all of this, one client introduced me to another client, and another.”
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`All of them swore up and down that they were following U.S. anti-spam laws to the letter. The CAN-
`SPAM Act was intended to make it more expensive and difficult for email marketers and spammers
`to send unsolicited junk email, but critics say it is essentially toothless and rarely enforced. Under
`CAN-SPAM, commercial emails can’t be spoofed (i.e., the address in the “from;” field can’t be faked
`or obfuscated), and the messages must give recipients a simple way to opt-out of receiving future
`missives.
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`“Legally speaking, we didn’t have any client on our network who broke the law. My dad was a
`lawyer and we’d routinely terminate anyone who violated our policies,” Holden said. “Ultimately, I
`think the fact that these clients were able to pay their bills on time — and their bills were massive —
`gave them some sort of air of legitimacy.”
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`HOW MANY SPAMS CAN A SPAMMER SPAM IF A SPAMMER CAN-SPAM SPAMS?
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`From the perspective of anti-spam groups, the main problem with the CAN-SPAM act is that it
`doesn’t require marketers to get opt-in approval from people before spamming them. Also, many
`large-scale junk email operations are not too dissimilar from spam campaigns run by cybercrooks
`— except instead of routing the mail through PCs that have been seeded with malware, commercial
`emailers send email from huge numbers of distinct Internet addresses that they rent from a vast
`network of hosting companies.
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`Eventually, large tracts of HostWinds’s Internet addresses wound up listed by The Spamhaus
`Project, an anti-spam service used by many ISPs. Networks that find themselves listed
`on Spamhaus’s various blacklists or “blocklists” soon discover their customers are unable to deliver
`email reliably. That’s because hundreds of ISPs route or deny email traffic based in part on
`Spamhaus’s blacklists of known, cybercrime-friendly hosts.
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`After HostWinds attracted the attention of Spamhaus, Holden said he and his team began taking a
`much closer look at the company’s email marketing clients.
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`“We started terminating customers who were pretty blatant spammers, where we’d take a look at
`the messages they were sending and say, ‘Wow, I wouldn’t want to receive this,'” Holden recalled.
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`Most of the marketers HostsWinds terminated were sending messages for marketing programs that
`try to sign customers up for various products or services that bill monthly and can be very difficult
`for consumers to cancel.
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`The Spamhaus listings were bad enough, but soon AOL began wholesale blocking email from
`HostWinds Internet addresses.
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`“That was really the turning point, because none of these email marketers wanted to be with us if
`they couldn’t reach AOL users,” Holden said. “We started getting listed massively by Spamhaus at
`that point, and we went to the anti-spam community and said, ‘Why are you guys picking on us?’
`They said, ‘We’re not picking on you: You’re harboring an army of spammers.'”
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`CUTTING OFF A LIMB TO SAVE THE BODY
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`Holden said he remembers exactly what he was doing when he made the difficult decision to
`remove virtually all email marketers from his company’s network, a costly choice that he likened to
`cutting off a limb or two to save a patient from a lethal gangrenous infection.
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`“I was in Dallas to visit our data center, and was in my hotel room doing planning in a notebook,
`and decided this was unsustainable,” he recalled. “The only [mailers] who were left were those with
`zero abuse complaints, and most of these were just doing regular newsletters. We gave up or lost
`about $150,000 in monthly revenue from that decision, a huge portion of our business.”
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`As painful as it was monetarily, the company reinvented itself over 2014 and 2015, and is now more
`profitable and sustainable than ever, Holden said. HostWinds now terminates mailers after a single
`abuse complaint, and Holden said he can now spot an email marketer from a mile away.
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`“We rebuilt the business focusing on core infrastructure, hosting enterprise Web sites and keeping
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`them online,” he said. “We now have a sustainable business that is not going to blow up in our faces
`in two to three years.”
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`Holden said these days the only spammers who host malware or blast junk email out of his
`networks are those that do so for only a very short time before they’re found out and terminated.
`Holden said there are some very persistent phishing gangs from Egypt that try using stolen credit
`cards to register new host services to set up phishing scams. Other scammers will set up a new
`hosting arrangement using stolen cards and then blast as much spam as they can until they’re shut
`down.
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`To combat the latter problem, HostWinds is now working with MailChannels, a Canadian anti-
`spam firm that scours customer networks for outgoing spam, and then helps the customer quickly
`identify and terminate spammy accounts.
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`MailChannels co-founder Ken Simpson said Holden’s turnaround story is rare but encouraging.
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`“It seems like there’s two different kinds of hosting companies,” Simpson said. “Those who are
`redeemable and those that are just support services for spammers. If you decide you want to be the
`latter, you can make decent money for a while, but at the end of the day you’ll wind up with this
`burning husk of a company with all this [Internet address] space that is completely blacklisted by
`everyone and useless.”
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