HOUSTON — The former CEO of the defunct web hosting provider Alpha Red was ordered by a federal judge today to post his home and life insurance as collateral after he was picked up by federal marshals.

James McCreary was arrested by the U.S. Marshal’s Service last week after he failed to appear at his company’s Chapter 7 bankruptcy proceedings in January and later was found in contempt.

With the order signed today, McCreary also must report to marshals twice a month and not leave the state of Texas. He also has been ordered to surrender his passport and work with the Chapter 7 trustee, who will regularly report to the court whether McCreary has been upfront and compliant over bankruptcy matters.

Alpha Red, which hosted many adult sites on its servers, filed Chapter 11 with about $10 million in debt to pay off, including $826,000 to the IRS. Later, the bankruptcy was switched to Chapter 7.

Many of Alpha Red’s former clients were left in the dark after the filing was initiated, bitter that the company was still seeking business right up to the filing.

“I’m relieved that he finally was caught,” said a source with a medium-sized ISP that lost nearly $50,000 to Alpha Red. “Maybe now some who lost money with Alpha Red can get some of their money back.”

The source told XBIZ that because of Alpha Red’s actions, numerous companies lost in excess of tens of millions of dollars.

Alpha Red has had a troubled past beyond leaving vendors without paid-for services.

Just two months before it filed bankruptcy, CWIE Holding Company Inc., the owner of CCBill, announced that it was planning to purchase all of Alpha Red’s assets.

The CWIE purchase would have included the acquisition of Alpha Red’s two privately owned datacenters in Houston, Texas; 300 Gbps of Internet connectivity; and its connections in 16 carrier-neutral facilities throughout the U.S.

But the deal was dead in the water after CCBill’s parent learned about trouble in Washington state.

In 2008, Washington state Attorney General Robert McKenna accused McCreary of selling “scareware” that made Windows XP users falsely believe that their registry had become damaged and corrupted.

The Washington state suit against Alpha Red went on to accuse the company of scaring customers into buying unnecessary cleaning software for $39.95 a pop.

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