Epik CEO tries to wriggle out of $327,000 refund lawsuit

Epik CEO Brian Royce has filed a motion to dismiss a lawsuit against him, as the company denies it defrauded a customer out of $327,000 in a botched domain purchase.

Royce was named alongside Epik companies and former CEO Rob Monster in a legal complaint last month by customer Matthew Adkisson, who had tried to buy the domain nourish.com through Epik’s escrow service.

But Royce says he should be removed from the list of defendants because he wasn’t employed by Epik when the deal was inked last May. He became CEO in September 2022, after Monster stepped aside.

The motion to dismiss was filed as the companies — Epik, parent Epik Holdings, and sister company Masterbucks — simultaneous denied the allegations of fraud and racketeering, while admitting they still owe Adkisson money.

Epik admits Adkisson paid $327,000 for the domain, that he never received the domain, and that he is still owed a refund:

Defendants admit that the domain name has not been transferred to Adkisson. Defendants additionally admit that they intended, and still intend, to return Plaintiff’s funds that he had paid for the purchase of the domain name

…

Defendants admit that Epik owes Adkisson a refund of the $327,000 in funds he previously transferred to it

Monster, who is also named as a defendant and remains Epik’s majority shareholder, has not yet filed his answer to the complaint with the court, according to PACER records.

Epik’s meltdown is a ticking time-bomb for ICANN

There are many ways ICANN could eventually wind up shutting down flailing registrar Epik, but it might face a nightmare of its own when it does.

Epik appears to have been suffering from serious cash-flow problems for the last several months, with some customers still complaining this week that they haven’t been paid money owed as far back as September.

It’s facing a lawsuit by a customer who says he’s owed over $300,000 over a failed domain purchase, accusations that it’s been running its escrow service without the proper paperwork, and claims that current and former executives may have “embezzled” customer money.

It’s an absolute dumpster fire that so far shows little sign of being extinguished, but unfortunately there’s very little about the situation that appears to be in ICANN’s Compliance wheelhouse.

ICANN Compliance has the right to terminate a company’s accreditation — its ability to sell gTLD domains — if that registrar breaches the terms of the Registrar Accreditation Agreement that all registrars must sign.

The RAA does not cover the secondary market, or escrow or store credit services like Epik’s doomed “Masterbucks”.

Ironically, ICANN would stand a better chance of shutting Epik down if its Whois service crashed, or if the registrar for some reason failed to publish an abuse contact on its web site.

However, if Epik is treating its ICANN fees the same way customers say it’s treating their funds, it can expect a nastygram or six from Compliance, if it has not done so already.

Most cases where ICANN ultimately terminates a registrar’s accreditation begin when Compliance gets a note from the bean-counters that somebody hasn’t been paying their quarterly invoices.

Typically, this serves as a tip-off that the registrar is having problems, so Compliance audits the company to see where else it might be in breach, often discovering other minor or major infractions it can add to the docket.

Epik paid ICANN just shy of $150,000 in its last-reported fiscal year to June 30, 2022. If its current cash-flow problem has caused it to miss an ICANN payment in the three quarters since then, Compliance could be another very powerful creditor knocking at its door.

Another way ICANN could bring out the deaccreditation hammer is if Epik suffers unfavorable court rulings related to financial mismanagement. The RAA specifically allows termination if a court finds a registrar committed “fraud” or “a breach of fiduciary duty”.

The customer lawsuit Epik is currently facing could make such a finding, if it reaches trial and things don’t go Epik’s way.

Perhaps a more immediate concern is that the RAA contains another clause allowing termination if a registrar “is disciplined by the government of its domicile for conduct involving dishonesty or misuse of funds of others”.

I am not a lawyer, but I can see an argument being made that this might have happened already.

As Domain Name Wire reported in February, the Insurance Commissioner of Epik’s home state of Washington recently fined the company $10,000 for selling its DNProtect service as an “insurance” product without the proper licences.

Does this count as being “disciplined by the government of its domicile for conduct involving dishonesty”? Legally, I don’t know.

DNW reports in the same article that the Washington state attorney general has been tipped off about Epik’s escrow service, which is also a regulated industry in which Epik apparently does not have the necessary paperwork to operate.

I’m soothsaying here, of course, but any future disciplinary action from Epik’s local AG could well give ICANN Compliance another deaccreditation trigger to pull.

There are multiple excuses Compliance could find to shitcan Epik over the coming months, but let’s look at the downside for ICANN if it does.

Epik has built itself up in recent years as the go-to “free speech” registrar. It’s welcomed, even courted, multiple registrants that have had their domains banished from other registrars for their sites’ controversial content.

That pretty much always means “far-right” content, of course.

Most recently, it took the business of kiwifarms.net, a forum accused of allowing member to doxx and issue death threats against transgender rights activists.

It’s previously been associated with domains for similarly controversial registrants including Andrew Tate, Infowars, 8chan, Gab and The Daily Stormer.

When Monster was replaced by current CEO Brian Royce last September, the company made a big deal about how the new guy and the old guy were aligned on the free speech issue. Royce has subsequently echoed those thoughts.

Given the narrative Epik has created around itself, can you imagine how a certain section of the online public, namely the fringe of the American right-wing, would react if ICANN essentially shut down the “free speech registrar”?

ICANN has for many years faced misinformed criticism that it has the power to take down web sites it does not agree with, that it acts as a gatekeeper for the internet, that it is or risks becoming the internet’s “content police”.

If ICANN were to deaccredit Epik, removing its ability to sell most domain names, it would be incredibly easy to construct a narrative that a bunch of Californian liberals are trying to destroy “free speech” by taking down loads of right-leaning web sites.

It wouldn’t be true, of course, but the notion would only need to be propagated by a clueless Congressperson, a disingenuous podcast host, or a sustained social media campaign, before ICANN’s very raison d’être came under focus by people who don’t particularly care about facts.

Epik customer exodus started when Monster quit

Domain registrants started leaving Epik in droves when CEO Rob Monster quit last year and serious allegations of financial mismanagement emerged, an analysis of the numbers shows.

Epik’s total gTLD domains under management began to free-fall in September 2022, dropping by more than 70,000 by the end of the year, almost all as a result of customers transferring their domains to other registrars.

Data from registry transaction reports I compiled shows Epik peaking at around 808,000 domains across all gTLDs at the end of August, having gone up every month that year.

But DUM started tumbling when Monster quit and customers started reporting problems extracting funds from their accounts in mid-September. Epik dropped to 792,000 domains that month, with 780,000 in October, 767,000 in November and 733,000 at the end of the year.

Transfers from Epik to other registrars also went up in September, almost doubling from the 9,500 domains reported in August to 16,000, a level of customer bleed it maintained until December, when it rocketed up to almost 23,000.

Most of the losses were of course in .com, but .net, .org and .xyz also saw big downsides.

The drop in revenue won’t help the company extract itself from its current dire straits. It’s publicly admitted it’s having difficulty paying its customers, some of whom complain they’re owed tens or hundreds of thousands of dollars.

Epik is facing a customer lawsuit, the prospect of a probe by its local state attorney general over its unlicensed escrow service, and recently had to shut down its unlicensed “insurance” service after a settlement with the Washington state insurance regulator.

Whoever runs its Twitter account has been pointing the finger of blame at Monster, saying the company, which it refers to as “Epik 2.0” is trying to move “out of a monster’s shadow”.

In recent days it’s tweeted reassurances that customers will eventually be made whole, legal threats against Monster (believed to still be non-executive chair) and, yesterday, expressions of a desire to “connect” with Monster and explore “alternative paths”.

Epik sued over financial meltdown

Domain registrar Epik has been sued by a customer who says he is owed $327,000 over an aborted secondary market purchase.

Matthew Adkisson says he paid the sum to Epik to buy the domain nourish.com from a third-party seller, with Epik paid $27,000 for its escrow service.

However, Adkisson alleges, the sale fell through and when he asked Epik for his money back he was given the runaround for months.

His lawsuit describes a scheme whereby Epik, former CEO Rob Monster and current CEO Brian Royce were using supposedly escrowed funds for general corporate — and possibly even personal — purposes.

There are even alleged Ponzi-like elements, with funds from new customers being used to pay off debts to former customers.

The suit describes it as a “widespread and illegal fraudulent scheme — replete with misrepresentations, embezzlement, and misappropriation”.

Similar complaints of this nature have been made against Epik for months, with many buyers and sellers struggling to get paid.

The suit, which suggests it believes some of Epik’s actions may have been criminal, lists eight counts including breach of contract, fraud and racketeering. Adkisson wants his money back, as well as unspecified damages.

You can read the complaint here (pdf). Hat tip to John Berryhill.

Euro registrars merge to form Your.Online

French registrar Gandi and Dutch registrar holding group Total Webhosting Solutions have announced they have merged to form a new company, Your.Online.

The combined entity says it has a million customers, revenue of €175 million ($183 million), and 600 employees.

Your.Online will operate eight brands, mostly in hosting. Gandi will remain as an independent brand under the new corporate umbrella. The TWS brand appears to have been retired.

Financial terms of the deal between the two private companies were not disclosed.

Gandi founder Stephan Ramoin will become the group’s non-executive chairman of the firm’s advisory board. Your.Online is helmed by Abe Bakker

I think today might be the first time in 25 years of reporting that I’ve seen the word “bullshit” in a press release.

I let ChatGPT cover GoDaddy’s Q4 earnings for me

Living and working in the UK, it’s always a bit irritating that the major, public, US-based domain name companies report their earnings after New York market close, which is usually 2130 UTC, 9.30pm my time.

GoDaddy is one such company, and GoDaddy reported its fourth-quarter and full-year results about an hour ago, so it seemed like a great opportunity to test out ChatGPT’s ability to write a news story for me when I’m too tired and emotional to do so myself.

I primed the tool by asking: “Could you write a news story in the style of Domain Incite if I provide you with some source material?”.

It responded: “Certainly! Please provide me with the source material and I will create a news story in the style of Domain Incite.”

I then pasted the almost entire GoDaddy earnings release, everything from the beginning of the headline to the beginning of the paragraph that begins “GoDaddy’s consolidated financial statements…”

It produced:

Sure! Here’s a news story in the style of Domain Incite based on the provided source material:

GoDaddy reported 7.2% YoY revenue growth in 2022, amounting to $4.1 billion, and normalized EBITDA of $1 billion, up 16.1% YoY, representing 25% margin. This was despite macroeconomic challenges. CEO Aman Bhutani credited GoDaddy’s innovative product roadmap for the success. “As we enter 2023, we are excited about the full launch of our commerce offerings empowering customers to transact everywhere seamlessly,” he said. CFO Mark McCaffrey said GoDaddy had taken steps to align priorities and cost structure to maintain the strong financial results, while investing in long-term initiatives. Net cash provided by operating activities rose by 18.1% YoY to $979.7 million, and free cash flow by 13.2% YoY to $968.6 million. Unlevered free cash flow increased 14.2% YoY to $1.1 billion.

In Q4 2022, GoDaddy signed a significant partnership agreement with merchant services provider FIS Worldpay to sell its OmniCommerce solutions for US-based small business customers and bank partners. GoDaddy also launched Managed WooCommerce Stores solution, which allows entrepreneurs to sell in-person and across marketplaces and social channels through a single unified dashboard. GoDaddy’s premier payments platform is now automatically attached to its domains and website building plans, enabling customers to transact seamlessly. In Q4 2022, gross merchandise volume in GoDaddy’s Commerce offerings reached $28 billion, up 10% YoY, while gross payments volume was $760 million. ARR for the Create and Grow group of products, including Websites + Marketing, Managed WordPress, Sellbrite, and GoDaddy Studios, surpassed $445 million, growing 8% YoY in Q4 2022. Overall, annualized recurring revenue (ARR) for applications & commerce grew 9% YoY to $1.3 billion in Q4 2022, while ARR from GoDaddy’s Core Platform grew 1% YoY to $2.3 billion.

Since the launch of its current share buyback authorization in 2022, GoDaddy’s share count has reduced by 10%. The company aims to participate in its customers’ success and drive long-term value for shareholders.

I have not read the ChatGPT story pasted above. I don’t know how accurate it is. I don’t know whether it follows DI’s house style (though I can tell from the length of the paragraphs that it’s got at least one thing wrong).

Based on my previous experience with this tool, I assume it’s a load of bollocks.

What do you think? Should I use ChatGPT to help write articles in future?

GoDaddy to lay off hundreds

GoDaddy has become the latest big tech firm to announce huge layoffs, with hundreds of employees set to be let go.

The company said last week it is laying off 8% of its staff. This equates to more than 500 job losses, based on 6,800+ the company’s web site reports.

Employees at three brands are most-affected — Media Temple, Main Street Hub and 123 Reg — with the former two also set to disappear as independent brands.

Main Street Hub is social media marketing firm from Texas that GoDaddy acquired in 2018. Media Temple is a hosting provider from California that GoDaddy acquired in 2013.

123 Reg is a UK-based registrar brand that was part of Host Europe Group until GoDaddy bought it in 2017. GoDaddy says the brand will remain, but some roles will be terminated. Staff will find out who’s staying and who’s going before the end of the month.

GoDaddy CEO Aman Bhutani blamed growth hindered by the “uncertain macroeconomic environment” for the moves.

The company, which reported revenue up 7.2% at $1.03 billion and a $100 million profit in the third quarter, is due to report its fourth quarter and full-year earnings this evening.

Domainers grumble as GoDaddy cranks up commission fees

GoDaddy has “simplified” its commission structure across three secondary-market acquisitions, leading in many cases to domainers making less money in future from their sales.

The company said there will now be a standard 25% commission across its Afternic, Uniregistry and Dan aftermarkets, which will be reduced to 15% if domainers use GoDaddy’s name servers (and therefore landing pages).

The move prompted online grumbles from customers of Dan, which GoDaddy acquired last year. They’d been paying 9% commission on their sales, so they’re losing out no matter what name servers they use.

The low commissions had proven a draw for domainers prior to the acquisition, and the increase was widely expected following the acquisition last June.

It’s better news for Afternic customers, who were paying 20%. GoDaddy cherry-picked some data to suggest domainers could come out slightly ahead, depending on their mix of sales marketplaces.

The changes are effective February 1.

Drop-catcher adds 100 more registrars after rapid growth

Drop-catcher Gname has added 100 new ICANN shell registrar accreditations, according to ICANN records.

The Singapore-based company has created companies with the names Gname 051 through Gname 150 for the new accreditations, which are used to increase its number of concurrent EPP connections to the .com registry and therefore its chance of catching a valuable deleting domain.

Each accreditation costs a minimum of $4,000 in ICANN fees per year.

The latest ICANN registry reports show that the parent Gname accreditation had 1,864,283 .com domains under management at the end of August, when it had only 50 active accreditations.

That was a huge increase on the 354,644 domains it had a year earlier, when it had just 10 active registrars. It seems the company is testing how far this up-scaling strategy can go.

The move means ICANN now has 2,655 accredited registrars on its books, far ahead of the 2,447 predicted for the end of June 2023 by ICANN’s current fiscal-year budget.

Melbourne IT to relaunch, return to roots, after $3.4 million acquisition

Australian registrar Webcentral.au is to revive its Melbourne IT brand with a renewed focus on the corporate domains market, following the AUD 5 million ($3.4 million) acquisition of a smaller rival.

The company said today it’s buying registrar New Domain Services and bringing its CEO, Jonathan Horne, on board as the new boss of Melbourne IT, which divested its corporate domains arm to CSCGlobal in 2013.

Webcentral now says it plans to “relaunch the Melbourne IT brand and business and pursue growth opportunities in the corporate domains services sector”, returning the company to its roots.

New Domain has revenue of AUD 2 million and EBITDA of AUD 1.2 million, with 25,000 customers, the company said.

Melbourne IT was among the first handful of registrars to be accredited by ICANN when it broke up Network Solutions’ monopoly in the late 1990s.