By Jon Hood
November 11, 2009
SnapNames.com, a prominent domain auction site, has been served with a class action lawsuit brought on behalf of consumers defrauded by a company vice president who allegedly submitted bids in an attempt to artificially drive up prices.
According to the complaint, filed Monday in a Miami court, Nelson Brady, Vice President of Engineering at SnapNames, submitted bids in tens of thousands of auctions over a four-year period, forcing good-faith bidders to shell out extra cash for their desired domains.
SnapNames announced the scandal in a notice sent out last week. The statement included the stunning admission that the fraudulent bids affected a full five percent of auctions since 2005 no small amount, given that the site holds hundreds of auctions every day. The company says that the employee flew under management's radar, setting up an account under a false name. This is a clear violation of our internal policy and was not approved by the company, according to the statement.
Perhaps anticipating litigation, SnapNames immediately promised rebates to consumers affected by Nelson's actions, to avoid any question about whether the company benefited from this conduct. Rebates will be for the difference between the prices they [consumers] paid in winning auctions, and the prices they would have paid had the employee not bid in the auctions. How the company plans to determine the difference between those two amounts is anybody's guess, although it says it will appoint an auditor to evaluate each consumer's claim.
The case is being handled by Santiago Cuerto, a Miami-based lawyer with the Cuerto Law Group. He filed the suit after his brother, who participated in auctions on SnapNames during the relevant time period, learned of the scam.
Cuerto told PC Magazine that his brother had suspected false bidding on a number of domain auction sites. He's been frustrated by the process for years, Cueto said of Carlos Cuerto. I think the entire industry needs to be cleaned up. To that end, Cuerto said he won't hesitate to file additional suits against other domain name sites if and where phantom bidding is occurring.
Brady, who used the handle Halvarez, apparently attracted the attention of fellow bidders long before the scandal was uncovered. A namepros.com thread from early 2006 features one frustrated user asking for good tactics on beating this guy on snapnames. Further downthread, a fellow bidder asks, Is that guy 'halveraz'? He seems to be there most of the time on my names, and I operate in a very specialized niche.
Users on a March 2009 dotweekly.com thread expressed a mixture of curiosity and grudging respect for the phantom bidder. User Acro notes that Our buddy 'halvarez' has transformed this practice into a science at Snapnames. Farther down, Ms Domainer remarks, Halvarez is legend; he has appeared in many of my auctions, tucked safely in the middle of the bidding list. A user named Tony says, In defense of 'Halvarez', he doesnt back out of domain bids.
SnapNames is encouraging those with questions to contact the company at (866) 690-6279 or email@example.com. The company has also posted an FAQ page on its website. The Cuerto Law Firm is asking for affected consumers to contact them at (305) 777-0377 or firstname.lastname@example.org.