Snapnames, an aftermarket domain name auction service, has reportedly discovered that a rogue employee set up an account and bid against other bidders. And was doing it for several years.

In a letter that I received today, Snapnames explained the situation:

From: SnapNames.com [mailto:noreply@snapnames.com]
Sent: Wednesday, November 04, 2009 12:23 PM
To: XXXX@XXXXXXXXXXX.com
Subject: Important Update From SnapNames

Dear Moniker customer:

I’m contacting you today to inform you of an unfortunate incident at SnapNames, and to let you know what the company is doing to address it.

Recently, SnapNames discovered that an employee had set up an account on the SnapNames system under a false name and, under this name, bid in SnapNames auctions. This is a clear violation of our internal policy and was not approved by the company. We deeply regret that this conduct has impacted our customers.

Extent of impact

This conduct affected a small percentage of SnapNames auctions:
• Bidding affected approximately five percent of total SnapNames auctions since 2005, most of which occurred between 2005 and 2007.
• The incremental revenue from the bidding represented approximately one percent of SnapNames’ auction revenue since 2005.
No matter the level of impact, SnapNames takes this matter extremely seriously. When the matter was discovered, the company immediately closed the account in question and began a thorough investigation. The employee has also been dismissed from the company.

SnapNames further discovered that, on certain recent and limited occasions, when the employee won an auction, the employee secretly arranged to refund from SnapNames to the fictitious account a portion of the winning bid amount.

Remedy to affected customers

Though on some occasions the employee won the auction, in many instances the bidding caused the ultimate auction winner to pay more for a name than had the employee not participated in the auction.

SnapNames neither condones this conduct nor wants to be perceived as benefiting from the conduct. Accordingly, we have decided that regardless of the circumstance, in every auction where the employee’s fictitious account submitted a bid which resulted in a higher price being paid by the winning bidder, SnapNames will offer a rebate, with 5.22% interest (the highest applicable federal rate during the affected time period), to affected customers for the difference between the prices they actually paid and the prices they would have paid, had the employee not bid in the auctions. The rebate will be available in cash or in credit on the SnapNames platform, at your discretion.

SnapNames has moved quickly to address this situation. The company has retained Rust Consulting, an independent third party, who will administer the rebate offer. Within the next week, Rust Consulting will contact affected customers to provide details regarding the offer.

Your business and ongoing relationship are important to us and we can assure you that we have taken all necessary steps to ensure the integrity of the platform and reinforced controls and procedures to avoid any possibility of further breach. These include:
• Enhanced monitoring of bidding activity for suspect behavior
• Additional controls over financial transactions
• Specific domain name registration policies for employees
In the meantime, if you have any questions, you may consult the FAQs here, or contact the SnapNames support team:

By e-mail: support@snapnames.com
Phone: +1 (866) 690-6279 (toll-free in the U.S.)
+1 (503) 241-8547 (outside the U.S.)

SnapNames, and all in the Oversee family of companies, are deeply disappointed with this incident. Since its founding in 2000, SnapNames has been committed to the principles of fairness and trust; the company wants to assure customers—through both words and actions—that it remains committed to those principles.

Thank you again for your business, and for your ongoing trust in SnapNames.

Sincerely,

Jeff Kupietzky Craig Snyder
President and CEO General Manager, SnapNames.com

SnapNames
1600 SW 4th Avenue, Suite 400
Portland, OR 97201

Whether it’s a domain name auction or any other type of auction, the driving up of prices like this is not an acceptable behavior.

There have been rumours that this former employee was Nelson Brady, the former VP of Engineering at Snapnames. I personally have not been officially told the name, but one could certainly look at the List of Snapnames Employees and probably figure it out for oneself. Domain Name News is also reporting that the name of this rogue executive (former Snapnames Executive) is Nelson Brady.

Snapnames has officially written up a FAQ Page to keep you informed of the situation. If you were a bidder in one of the auctions, then you will be contacted at some point by the consulting company that they have hired to deal with this. You may want to seek legal advice as to whether or not you should accept their offer or not.

I’ll keep you posted here as to what’s going on, certainly this is a fluid situation and I’ll update as warranted. I’d like to credit www.domainnamenews.com for breaking the story.

At this point, I’m beginning to wonder if this incident had anything to do with what was really going on behind the scenes.

Thanks to Elliot for posting this on his blog and keeping us all updated. And DNN, as well, for first reporting this.

More here about Halverez and Nelson Brady. There is a photo of Nelson Brady here over at DN Journal.

Washington Post has picked up the story here, as well. Techcrunch is also apparently covering the story, as well.

Adam has posted a great editorial here. A must-read. Also, my buddy Chef Patrick also is talking about the Snapnames domain name scandal here.

DN Expert also has a word about it, as well. Apparently DN Expert says that Snapnames is “doing the right thing”.

TheDomains asks about getting money back. Domain Gang has their say as well.

Domain Name Wire also is talking about this Snapnames incident, which is sure to be another black eye:

This is obviously bad news for SnapNames and Oversee.net. But how they have handled the situation shows the company’s commitment to professionalism and making things right.

DNJournal.com has posted photos of Nelson Brady, and has other interesting information about the Snapnames Nelson Brady incident.

Just learned that Snapnames’ Extended Auction has abruptly been ended on a quite note.

Rick has his say here. He brings up the question, “are there more”?

There’s an interesting article that sums it all up pretty well over here. Sorry, but Nelson Brady, you’re no Bernie Madoff.

The Internet Storm Center also weighs in, as well.

Domain Bidder Halvarez was given sniper of the year award last month. Domain Gang has an interesting post from October 2009 that details some of the activity.

Update: 11/05/09 5:36pm CST: I just received a statement from Mason Cole, VP Corporate Communications at Snapnames. Regarding the discussing of any names involved in this situation, Mr. Cole had this to say: “SnapNames won’t discuss any HR-related matter.” Certainly, this is understandable. He also wished to convey the fact that “everyone at SnapNames is extremely disappointed over this situation.”

Update: 11/09/09: There is a poll that has been set up by Domain Name News regarding the Snapnames Rebate Offer. If you have a chance, please take the poll.

Blim & Edelson, Chicago based class-action attorneys, now have a website to gather up possible plaintiff names and investigate the case.

Update: December 1, 2009: – Rick has uploaded some audio files from the Targeted Traffic Conference. His blog post explains it all pretty well.

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