Online video game firm pays fine over allegations it ‘hijacked’ N.J. Subscriber computers.

Written by Alexi Friedman / Courtesy of The Star Ledger

Online video game enthusiasts seeking to shield themselves from fellow gamers who cheat turned to E-Sports Entertainment, which represented a kind of fortress of fair play.

New Jersey customers and others from around the country paid E-Sports $6.95 a month to play company-supported games on anti-cheat servers.

But that security was just a virtual one, and E-Sports turned out to be the problem, acting Attorney General John Hoffman said.

Today, E-Sports agreed to a $1 million settlement with New Jersey over allegations it used malicious software to seize control of thousands of customer computers in order to illegally mine for the virtual currency bitcoin, Hoffman said.

Commack, N.Y.-based E-Sports deployed the malicious code to monitor users’ personal computers even when they weren’t signed onto or using the service, authorities said. Subscribers have to download and install E-Sports software onto their computers, enabling the company full administrative access to those computers.

E-Sports, which bills itself the largest competitive video gaming community in North America, created a network of computers running malicious software with customer computers, Hoffman said. That allowed the company to mine for bitcoins, the virtual form of currency that does not have government backing.

State officials said E-Sports took control of 14,000 computers in New Jersey and across the nation in a two-week period, generating roughly $3,500 by mining for bitcoins. On its website, E-Sports claims to have more than 580,000 members, and said it has banned 71 “recent cheaters.”

The company did not return calls seeking comment.

E-Sports co-founder Eric Thunberg and its software engineer Sean Hunczak allegedly developed the malicious bitcoin-mining software without users’ knowledge, state officials said. The software used the computing power of thousands of E-Sports customers’ to mine for bitcoins faster, allowing Hunczak to create at least four bitcoin “wallet” addresses, the officials said.

There, he deposited the currency mined via the illegal operation. Hunczak then allegedly sold the bitcoins, converted them into dollars and deposited them into a personal bank account.

“These defendants illegally hijacked thousands of people’s personal computers without their knowledge or consent,” Hoffman said. “And in doing so gained the ability to monitor their activities, mine for virtual currency that had real dollar value, and otherwise invade and damage their computers.”

E-Sports must pay New Jersey $325,000 of its $1 million settlement. The remainder is suspended and will be vacated within 10 years provided the company adheres to all settlement terms and avoids future violations.

The company also has also agreed to put in place a privacy and data security program that contains comprehensive privacy controls and procedures, and is designed to ensure the confidentiality of consumer information.

The announcement came a day after Google reached a $17 million settlement with 37 states, including $650,000 with New Jersey, for circumventing privacy settings for some Internet users.