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SnapNames settles shill-bidder class action

Kevin Murphy, October 26, 2010, Domain Sales

Domain name auctioneer SnapNames said that it has settled the class action lawsuit filed against it by disgruntled domainers after one of its employees was found to be a shill bidder.

It seems to have had a bit of a result, too. Class members will receive exactly the same amount they would have had they accepted its rebate offer, according to a statement released by the company today.

The case was filed almost a year ago, after it emerged that Nelson Brady, a SnapNames employee, had been posing as a bidder in domain name auctions in order to bump up the final sale price.

Posing as “Hank Alvarez” or “halverez”, Brady stood to gain bonuses based on performance targets as a result of SnapNames’ acquisition by Oversee.net, its current owner.

After the abuse was discovered, SnapNames offered affected customers a rebate equivalent to the money they would have saved on a winning bid had “halvarez” not outbid them.

SnapNames said today:

Class members (which are United States residents who were extended the rebate offer but have not yet accepted) have been or shortly will be notified of the settlement terms and amounts (which are identical to the amounts affected bidders were offered in the rebate offer we extended last November).

This seems to mean that anybody who was holding out for a bigger settlement is out of luck.

The deadline for accepting the rebate expires November 4, but the deadline to become part of the class action is not until December 17.

SnapNames will have paid out $2 million to customers in total.

(I wonder how much the class action attorneys are to receive).

More info can be found at snapsettlement.com.

SnapNames has also settled its lawsuit against Brady for an undisclosed amount. The company sued him for $33 million in May.

Oversee said it “believes the financial penalty is appropriate considering the seriousness of the improper activity”.

SnapNames lawsuit: “halvarez” was chasing $1.5 million bonus

Howard Nelson Brady, the former SnapNames VP and alleged shill-bidder known as “halvarez”, was chasing a $1.5 million performance-related bonus, according to a lawsuit filed yesterday.

SnapNames and its parent, Oversee.net, have sued Brady for $33 million, claiming he used the pseudonym “Hank Alvarez” and his privileged access to SnapNames’ auction platform to artificially inflate the sale prices of auctioned domain names.

According to the complaint, Brady started his alleged shill-bidding in order to boost SnapNames’ revenues and boost his potential “earn-out” from the June 2007 acquisition of SnapNames by Oversee.

“The purchase of the SnapNames business was based almost entirely on projections extrapolated from past revenues of SnapNames, which had been artificially inflated by Defendant Brady’s shill-bidding,” the complaint says.

Oversee further claims that, following the acquisition, Brady set about embezzling money from the company by buying domains using his “halvarez” account and then refunding himself some of the purchase price.

The company alleges he made $175,000 that way, before suspicious activity was noticed on his account.

“Hank Alvarez” had a mail drop, a Paypal account, and sometimes sent emails to Brady, which were then forwarded to other members of staff, the lawsuit claims.

The lawsuit is seeking a mountain of cash. Clearly, Oversee and SnapNames are not pulling any punches when it comes to attempting to restore their reputation.

The bulk of the $33 million is made up of punitive damages, but Oversee also wants Brady’s entire salary and other compensation for the period while the alleged activities were taking place.

You can read the complaint in PDF format here.