The FTC settled with an app developer accused of hijacking smartphones for digital currency mining.

The Commission filed a complaint last week against an app developer who was said to have surreptitiously embedded an application with malware that used victim's handsets to perform virtual currency mining without their knowledge or consent.

The suit, filed in the New Jersey district court by the FTC along with the Attorney General of New Jersey and the New Jersey director of consumer affairs, alleged that Ryan Ramminger, creator of the Prized app, violated the FTC Act by misrepresenting what the software did on Android handsets.

According to the FTC, Prized was presented as a customer rewards app, allowing users to collect gift cards and store credit for playing affiliated games or using apps. In reality, the FTC alleged, the app was using the device to perform calculations for the mining of the Dogecoin, Litecoin, and Quarkcoin currencies.

In addition to misleading users about the app's activities, the complaint also alleged that Prized drained user batteries and racked up data charges without the user's knowledge as it sought to harvest virtual cash.

"Consumers downloaded this app thinking that at the very worst it would not be as useful or entertaining as advertised,” New Jersey Attorney General John J. Hoffman said in a canned statement

“Instead, the app allegedly turned out to be a Trojan horse for intrusive, invasive malware that was potentially damaging to expensive smartphones and other mobile devices.”

The settlement prohibits Ramminger from further misleading users about what apps do when installed.

Under the terms of the settlement (PDF), Ramminger and his company Equiliv Investments will not have to admit to any wrongdoing, but will be forced to pay a $50,000 penalty to the state of New Jersey and a $5,200 penalty to be distributed out of state.

They will also be asked to submit business details including address changes, role changes and mergers for the next 20 years. Should Ramminger and Equiliv violate the settlement, another $44,800 in suspended penalties will be imposed. ®