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Defunct Famous Four ordered to hand $1.5 million back to investors

Former domain registry manager Famous Four Media has been ordered to return money to investors that was being used as insurance against its portfolio of gTLDs going out of business.

In an April 18 ruling (pdf) from Gibraltar’s Supreme Court, FFM and its CEO Iain Roache are told that original investors Domain Venture Partners are the true owners what looks to be about $1.5 million being used to back letters of credit in ICANN’s name.

It’s a very complicated ruling, reflecting the complex structure of the FFM/DVP relationship. It wants for clarity in some areas, and is probably best suited to interpretation by a forensic accountant.

Nevertheless, I’ll give it a shot.

Basically, back in 2011 businessman Iain Roache recruited a bunch of international investors to join him in funding applications for 60 new gTLDs. The investment vehicle was and is called Domain Venture Partners.

Each application had an associated “bid vehicle”, essentially a Gibraltar-based shell company with names along the lines of Dot Science Ltd or Dot Accountant Ltd.

Those of the vehicles that were successful in their applications continue to be the official registry sponsors for 16 active gTLDs. They’re all owned by DVP.

Famous Four was a separate company, owned 80:20 by Roache and business partner Geir Rasmussen, hired by DVP to manage the business of actually selling domains.

For many years, myself and pretty much everybody else covering the domain name industry referred to FFM as if it was the owner of the TLDs, more or less interchangeably with DVP.

In fact, FFM was just a DVP contractor and behind the scenes DVP was growing increasingly unhappy with how the domains were being managed, DVP investor Robert Maroney told DI last August.

For about a year now, FFM has been in liquidation. DVP kicked it out of the registry management business and replaced it with a new company that it controls called GRS Domains, managed by a PricewaterhouseCoopers accountant called Edgar Lavarello.

Thirteen of the DVP bid vehicles sued Famous Four to claim ownership of, among other things, the money backing the so-called “Continuing Operations Instruments” that ICANN demanded from each new gTLD applicant.

The COI, usually a letter of credit from a big bank, were used to give ICANN the confidence that new gTLD domain registrants would not be affected by dodgy registries going out of business and their domains immediately going dark. The money would fund ongoing technical operations for a few years, giving registrants time to find a new home for their web sites.

In this case, Famous Four’s liquidator refused to agree that the money backing the COIs was rightfully DVP’s.

What seems to have happened is that in mid-2016 the DVP letters of credit were hastily switched from Credit Suisse to Barclays, after Credit Suisse closed down its Gibraltar branch.

There was a period in which both sets of LoCs were active, in order to remain compliant with ICANN’s rule that there must be an active COI at all times.

The original Credit Suisse LoCs had been funded by DVP, but the Barclays LoCs were funded by FFM, or quite possibly Roache himself, to the tune of about $1.5 million.

FFM was then repaid by the return of the money backing the Credit Suisse LoCs, when those LoCs were closed, according to Chief Justice Anthony Dudley’s ruling.

After the switch of banks, the LoCs were no longer in the names of the DVP bid vehicles; they belonged to FFM. The money DVP put up to originally secure the COIs was now in FFM’s control.

Dudley now seems to have ruled that FFM now owes DVP this money back, and that the liquidator, Grant Jones of Simmons Gainsford, was wrong to withhold it.

In fact, the judge has some quite stern words for Jones, saying that he was “wholly inappropriate” when he temporarily turned over his responsibilities as liquidator to Roache and his law firm. Dudley wrote:

It may be that it arises as a consequence of the Liquidator having limited funds with which to engage in litigation. But whatever the reason, the position adopted by the liquidator of FFM in these proceedings has been unusual and certainly capable of being construed as running counter to the fundamental principle of objectivity required of a Liquidator, now codified in the Insolvency Practitioner Regulations 2014. Rather than formulate his own view (or as urged by me at a preliminary hearing seek his own independent legal advice) by letter dated 1 March 2019 GJ sought to abrogate his responsibility and authorised IR and JSF to act on behalf of FFM

That aside, the main piece of evidence that appears to have caused Dudley to side with DVP was a set of emails from Famous Four chief legal officer Oliver Smith to DVP investors that were sent at the time the LoCs were switching banks.

Smith confirmed in one of these emails that FFM was basically just acting as a conduit for DVPs bid vehicles, which by that point were operational registries.

The judge noted that the Smith email that confirmed this was submitted in evidence by Lavarello and Maroney only after Roache had submitted the rest of the thread, excluding this email, in his own evidence.

Dudley ruled that the DVP companies should get what they asked for, namely the funds associated with the LoCs. It’s not entirely clear from his ruling how much this is, but by my reading it’s around the $1.5 million mark.

The liquidation, which is ongoing, is to the best of my knowledge unrelated to the still unexplained demise of AlpNames, the registrar and close FFM partner also owned by Roache and Rasmussen.

Finally, a disclaimer.

Because I’ve already had one spurious legal threat related to my ongoing coverage of Famous Four’s demise, and don’t really need the arseache of any more, I’m going to state unequivocally for the record that I’m not alleging any wrongdoing by anyone.

If I’ve got anything wrong, as always I will gladly issue a correction. Just ask, and show your working. No need to sic the lawyers on me.

You can read the judge’s decision (pdf) and decide for yourself what’s been going on.

ICANN to host first-ever high-stakes dot-brand auction

Kevin Murphy, May 7, 2019, Domain Sales

Two companies that own trademark rights to the same brand are to fight it out at an ICANN auction for the first time.

Germany-based Merck Group will fight it out for .merck with American rival Merck & Co at an auction scheduled to take place July 17.

Because it’s an ICANN “last-resort” auction, the value of the winning bid will be disclosed and all the money will flow to ICANN.

It will be the first ICANN gTLD auction for three years, when a Verisign proxy agreed to pay $135 million for .web.

The two Mercks could still avoid the ICANN auction by resolving their contention set privately.

The German Merck is a chemicals company founded in 1668 (not a typo) and the US Merck was founded as its subsidiary in the late 19th century.

That division was seized by the US government during World War I and subsequently became independent.

The German company uses merckgroup.com as its primary domain today. The US firm, which with 2018 revenue of over $42 billion is by far the larger company, uses merck.com.

Both companies applied for .merck as “community” applicants and went through the Community Priority Evaluation process.

Neither company scored enough points to avoid an auction, but the German company had the edge in terms of points scored.

Both applications then found themselves frozen while ICANN reviewed whether its CPE process was fair. That’s the same process that tied up the likes of .gay and .music for so many years.

While the July auction will be the first all-brand ICANN auction, at least one trademark owner has had to go to auction before.

Vistaprint, which owns a trademark on the term “webs” was forced to participate in the .web auction after a String Confusion Objection loss, but due to the technicalities of the process only had to pay $1 for .webs.

Dead dot-brands hit 50

Two more dot-brands are on their way out, bringing the total to fall on their swords to date to a nice round 50.

Both of the new departures appear to be brands belonging to the Saudi telecommunications company Etihad Etisalat, which does business as Mobily and has annual revenue approaching $1.8 billion.

The gTLDs in question are .mobily and موبايلي., the Arabic version of the brand, which sits in the root as .xn--mgbb9fbpob.

As is usual in cases of dot-brand self-termination, neither TLD had actually been put to any use beyond the obligatory nic. site.

Despite Mobily being based in Saudi Arabia, the registry is actually a Bahrain company, Greentech Consulting, apparently being run by a US-based new gTLD consultancy called WiseDots.

I’ve never heard of this outfit or its point man before today and its social media activity seems to have dried up shortly after the new gTLD application window closed in 2012.

The registry was hit by a breach of contract notice in December 2016 after it apparently forgot to pay its ICANN fees for a while, but it managed to resolve the issue without further action.

These five TLDs contain 80% of all child abuse images

Online child abuse watchdog the Internet Watch Foundation has released its 2018 annual report, and it fingers the five TLDs that host four in five cases of child sexual abuse images and videos.

The TLDs in question are Verisign’s .com and .net, Neustar’s repurposed Colombian ccTLD .co, Russia’s .ru and Tonga’s .to.

IWF found the illegal content in 3,899 unique domains, up 3% from 2017’s 3,791 domains, in 151 different TLDs.

Despite the apparent concentration of illegal web pages in just five TLDs, it appears that this is largely due to the prevalence of image-hosting and file-sharing “cyberlocker” sites in these TLDs.

These are sites abused by the purveyors of this content, rather than being specifically dedicated to abuse.

It would be tricky for a registry to take action against such sites, as they have substantial non-abusive uses. It would be like taking down twitter.com whenever somebody tweets something illegal.

In terms of domains being registered specifically for the purpose of distributing child abuse material, the new gTLDs created since 2012 come off looking much worse.

IWF said that last year it found this material on 1,638 domains across 62 new gTLDs. That’s 42% of the total number of domains used to host such content, compared to new gTLDs’ single-figures overall market share.

The number of URLs (as opposed to domains) taken down in new gTLD web sites was up 17% to 5,847.

IWF has a service that alerts registries when child abuse material is found in their TLDs.

Its 2018 report can be found here (pdf).

Another five Amazon TLDs move to Nominet

Another five gTLDs owned by Amazon have made the back-end switch from Neustar to Nominet.

According to changes to IANA records this week, Nominet is now the registry services provider for .bot, .zappos, .imdb, .prime, and .aws.

This brings the number of Amazon TLDs to migrate from Neustar to Nominet recently to 40.

Amazon has 52 gTLDs in its portfolio. It moved 35 of them to Nominet a couple weeks ago.

Neustar told us at the time:

in an effort to diversify their back-end support, Amazon has chosen to move some, but not all, of their TLDs to another provider. Neustar will still manage multiple Amazon TLDs after the transition and we look forward to our continued partnership.

Moving .bot is notable as it is one of only six Amazon TLDs currently accepting registrations. It’s still many months away from general availability, but it has about 1,500 names in its zone. The other four movers are currently pre-launch.

It may or may not be significant that no non-Latin-script TLDs belonging to Amazon have made the transition.

According to IANA records, Neustar is still managing 12 Amazon strings, only three of which — .song, .coupon and .zero — are not internationalized domain names.

If those three TLDs were to also make the jump to Nominet over the coming weeks, I would not be in the least bit surprised.

Nominet does not currently handle IDN TLDs for any client.