It was in May 2007 that Oversee bought Snapnames.com for tens of millons of dollars.
Shortly thereafter, Network Solutions its largest registrar partner used the escape clause in their contract with Snapnames.com to pull out of their agreement.
Now it appears that the former employee of Snapnames engaged in shill bidding was also a shareholder of the company that sold Snapnames.com to Oversee.
If, as we quoted President of Oversee Jeff Kupietzky as saying, 75% of all this shilling bidding took place prior to Oversee’s acquisition of Snapnames.com, it would be logical to conclude that the financial information Oversee received from the company that sold Snapnames, were inflated by shill bidding.
We inquired as to whether the former employee was also shareholder of the company that sold Snapnames.com to Oversee and received this response:
“””Yes, the former employee was a shareholder, as were all SnapNames employees.””
The lawyer in me tells me if the person responsible for the shill bidding was a shareholder of the old company as well, this may allow Oversee to claim misrepresentation and seek damages against the company that sold them Snapnames.com.
Shill bidding by an employee is bad enough, but it is alleged that this individual engaged in this behavior while he was a shareholder of the company as well.
For the record, when I asked Mr. Kupietzky about this issue his response was:
“””While SnapNames doesn’t discuss legal issues, we are considering all available legal remedies”””
Fantastic and very logical post. I am not sure of the statute of limitations, but I am sure that Oversee will follow through in whatever way possible. I imagine the whole industry will be following this situation closely over the coming months.
I knew it!!
It was far to coincidental where the bidder against me would bid up to just under my proxy bid forcing me to pay my maximum $$.
Rediculous. And I think there are several more people engaged in it over at Snapnames.
Interesting take. Not sure if they would be able to pin the fraud on “The Company” rather than “the employee” Not likely to get any money back from the original shareholders (outside of Brady) unless they can prove willful negligence on their part. One wrinkle would be if Brady signed the sales agreement. Oversee also has some responsibility with due dilligence so I am afraid they will be on the hook. They might try and sue to recoup but likely out of luck.
Chip
I think if a shareholder is involved in the fraud, the other shareholders are going to have a hard time separating themselves away from his activities, but that will be for a court to decide.
I give Oversee a pretty good shot at getting some money back via a court decision or more likely a settlement.
Due diligence generally does not include covered-up fraud. I don’t think that Snapnames could use that as a defense to any litigation that might be brought by OVERSEE
Good post MHB,
This reminds me of your post http://www.thedomains.com/2008/06/29/godaddy-insider-bidding-makes-non-domain-blog-headlines/
While its not the same, certainly in a similar arena. I was surprised to just find InsiderBidding.com open after reading your post and just grabbed it. Worth a reg fee flyer IMO as “Insider Bidding” can be the new “Insider Trading” of a new financial ecosystem across many industries.
They are covering their tracks. I cannot see any bid history prior to 2007 in my account. It was there a few days ago.
This coverup is really bad. They are handling it really poorly. Shame on Oversee.
This would absolutely be grounds for a lawsuit and IMHO I don’t see how they can not sue. By coming clean before this was leaked by someone they are clearly trying to send the message that this is a rogue employee and not a core part of the business. Even if the settlement resulted in the employee in question losing his profit/original equity from the transaction, it would be enough of a moral victory to say we take this matter seriously. Sending an email to all of your customers about a scandal takes guts, but playing victim will help to offset some of the mistrust and criticism that will come from this.
Think about why this went on for so long….
Before Oversee bought SnapNames, this scam increased the income on the books for SnapNames substantially. Added to that, NSI was on board with Snap for the lateral transfers too, making Snap look attractive at 25M.
Now Oversee buys it… NSI jumps ship… but the shill bids are still going strong, making sure the revenue is still pouring in.
Oversee finds out, we don’t really know when… maybe sees this as an opportunity to get some of that 25M back due to fraud… they don’t get satisfaction though.
The only action that makes any sense at this point is to blow the lid off it, go public, and try to wear the white hat. That’s why RUST was called in, they are the uber class Damage Control team, look ’em up.
I’d think that whatever the cost in refunds and consultant fees are for this mess, Oversee is going to collect that and more for the obvious long standing nature of this fraud.
Every domain forum has been calling BS on “halvarez” for years… and Snap’s response has always been a consistent “No, he is a real and very good client that buys lots of names” Kjel has stated that many times. Now we are told that halvarez would get refunds when he actually won names? WTF?
While everyone is running around burning Nelson dolls in effigy, there is no doubt in my mind that he could not possibly have orchestrated this whole scam alone….
Think about it.
Think about why this went on for so long….
Before Oversee bought SnapNames, this scam increased the income on the books for SnapNames substantially. Added to that, NSI was on board with Snap for the lateral transfers too, making Snap look attractive at 25M.
Now Oversee buys it… NSI jumps ship… but the shill bids are still going strong, making sure the revenue is still pouring in.
Oversee finds out, we don’t really know when… maybe sees this as an opportunity to get some of that 25M back due to fraud… they don’t get satisfaction though.
The only action that makes any sense at this point is to blow the lid off it, go public, and try to wear the white hat. That’s why RUST was called in, they are the uber class Damage Control team, look ’em up.
I’d think that whatever the cost in refunds and consultant fees are for this mess, Oversee is going to collect that and more for the obvious long standing nature of this fraud.
Every domain forum has been calling BS on “halvarez” for years… and Snap’s response has always been a consistent “No, he is a real and very good client that buys lots of names” Kjel has stated that many times. Now we are told that halvarez would get refunds when he actually won names? WTF?
While everyone is running around burning Nelson dolls in effigy, there is no doubt in my mind that he could not possibly have orchestrated this whole scam alone….
Think about it.
Sorry… forgot to say great post – can’t wait to read your next one!
There ws a case a few years ago involving Cendant where the previous CEO provided false info and fake revenue before he sold it. Cendant spend about 8 years in court trying to get jail and money from the guy (Walter Forbes) Eventuall they did but took a while. He got: 12 years, 3+Billion in fines. http://www.msnbc.msn.com/id/16672186/
I am curious to see how big this really is. Hundreds of Thousands? Millions? Tens of Millions? If I added up all the amount that people are due based on their comments in the past 24 hours, it could be close to $100 million….but that is based on the hyperbole domainers are famous for. 🙂 My guess is that it will be around $1.0-1.5 million. Still Huge!
Our law firm is investigating a claim against SnapNames relating to allegations of bid rigging. We would be very interested in learning more about your experience, and those of other SnapNames bidders whom you might know. Anything you share would be confidential, unless you tell us otherwise.
At some point, we may be interested in filing a class action lawsuit. If we do, no one in the class would have to pay anything unless there was a recovery. Even then, our fees would have to be approved by a court.
We would love to hear from you. Thank you for taking the time to read this.
Austin Tighe
512.372.8100
austin@feazell-tighe.com