Domain name auction house admits internal bidding corruption

David M Williams
Thursday, 05 November 2009 09:11

Opinion and Analysis

This means, without any doubt whatsoever, that auctions took place on SnapNames and an internal employee placed bids which resulted in auction winners paying more than they otherwise would have.

Additionally, on occasion the employee won the auction. This thus caused the legitimate auction bidders to miss out. Further, the employee was not entirely out of pocket because it appears this person “secretly arranged to refund from SnapNames ... a portion of the winning bid amount.”

It is not stated what the employee did with the winning auctions but it would stand to reason they were re-sold. Perhaps even by direct approaches to the second-highest bidder.

The executives go on to list mechanisms they are instituting to prevent further internal corruption and to compensate affected parties.

While SnapNames did not identify the individual others have been less discrete. Dotsnews.com names the employee as Nelson Brady who used the handle halvarez when bidding on SnapNames auctions. Brady was Vice President of Engineering for SnapNames until being fired over the incident.

Brady’s actions as halvarez had received attention and he was the subject of at least one lengthy topic on the Domain Name forums web site due to his seeming inside knowledge and winning streaks.

This scandal has potentially vast reach with DotsNews going on to say that halvarez/Brady dumped a large number of domains to Internet REIT (iREIT) in 2006 - domains that were snatched away from sincere, back-ordering customers.

For many, this confession by SnapNames merely reinforces what has long been always believed about domain name backordering services.

Further, such corruption could not have occurred had SnapNames delivered to its customers the domain they requested rather than opened it up for auction, allowing speculators to make money through buying and selling domain names that never occurred to them until it came up in auction.

It will take a lot of work for SnapNames, and the domain name selling industry as a whole, to regain trust, particularly while shady deals between domain registrars and back ordering services continue to go undisclosed.