Bigsmart.com Settles Internet Fraud Lawsuit for $5 Million

An Arizona company that sells “Internet malls”--Web sites with links to retailers--will pay $5 million back to its customers to settle charges that it operated an illegal pyramid scheme, federal regulators announced Tuesday.

Mark and Harry Tahiliani, the proprietors of the Web site called Bigsmart.com, also agreed to post a $500,000 bond before engaging in another similar marketing operation, the Federal Trade Commission said.

Bigsmart charged more than $100 for each mall, the FTC said, and claimed that customers would make substantial income on the deal if they continued to recruit more participants. Customers received commissions if visitors clicked links on their site and made purchases at the stores.

“Bigsmart sees the agreement as a reflection of its ongoing commitment to high consumer standards,” said Susan Beach, spokeswoman for the Mesa, Ariz.-based company.

The company’s Web site states that despite the settlement agreement, it is still in business. The company has lowered its price for hosting the personalized Internet malls, and the site contains several pages that claim the company is not an illegal pyramid scheme, but a multilevel marketing operation.

Explanations on the site state that the company blames some of its members for “unscrupulous” conduct, which led to the federal investigation.

Not all customers will earn “substantial money,” the Bigsmart site says, asserting that the majority of its customers used Bigsmart “for their personal enjoyment, convenience, use and savings on shopping on the Internet, and not to earn income, substantial or otherwise.”