The FTC said the now-defunct company violated Section 5 of the FTC act by misrepresenting to consumers that personal information would never be shared with third parties and then disclosing, selling or offering that information for sale.
The FTC’s suit seeks injunctive and declaratory relief to prevent the sale of information that Toysmart collected.
“Even failing dot-coms must abide by their promise to protect the privacy rights of their customers,” said Robert Pitofsky, FTC chairman.
Toysmart.com announced its intention to sell its assets, including customer information, in late May.
The situation was brought to the attention of the FTC by TRUSTe, a non-profit privacy group