Wallace's prolific spamming has resulted in encounters with the United States government, anti-spam activists, and large corporations such as Facebook and MySpace.
The revised company was plagued by major financial problems, as well as the spectre of its former self, with large numbers of people unconvinced of Wallace's change of heart.
After Wallace's internet connection was disconnected for spamming in 1999, he filed a lawsuit against anti-spam activist Mark Welch, but abandoned the suit a month later.
In 2001 he was linked to a website, passthison.com, which utilized multiple-window launching to snag Web viewers, an advertising practice rarely seen outside of the online pornography industry.
On October 8, 2004, the Federal Trade Commission filed suit against Wallace and his company, SmartBOT, for infecting computers with spyware then offering a solution to remove the problem for $30.
[12] On January 26, 2008, The Register reported that the FTC has asked the Judge overseeing the 2006 settlement to find Wallace and partner Walter Rines in civil contempt of court for their use of malware and social engineering on MySpace to promote porn and gambling sites.
[18] On August 4, 2011, Wallace was indicted by a federal grand jury in San Jose, California, on various counts of electronic mail fraud, intentional damage to a protected computer, and criminal contempt.
[20] In August 2015, Wallace pleaded guilty to electronic mail fraud and criminal contempt of court as well as admitting to mass spamming in 2008 and 2009.
[21] In June 2016, Wallace was sentenced to thirty months in prison and ordered to pay hundreds of thousands of dollars in restitution for bombarding Facebook users.
U.S. District Court Judge Edward J. Davila also sentenced Wallace to mental health treatment and five years of probation once he is released.