Mailer-Daemon failure notice?

I've been getting a lot of failure notices in my hotmail account saying a bunch of spam e-mails under my account couldn't be sent. Then in my junk folder I got e-mails from "MAILER-DAEMON" saying the same thing. I read up on this Mailer-Daemon online, and apparently it's someone sending spam under my account. But the scary thing is that this spam is being sent to people under my contact list. Is there any way to stop this? Would closing my account help? Thanks in advance!