$65 Million Judgement Against a Con Who Stole domain name of sex.com. The Con Didn't Pay and Still At Large

2010-06-30T17:01:00.002-07:00

“Sex on the Internet?,” they all said. “That’ll never make any money.” But computer-geek-turned-entrepreneur Gary Kremen knew an opportunity when he saw it. The year was 1994; domain names were free for the asking, and it would be several years yet before Henry Blodget and hordes of eager NASDAQ day traders would turn the Internet into the Dutch tulip craze of our times. With a quick e-mail to the domain name registrar Network Solutions, Kremen became the proud owner of sex.com. He registered the name to his business, Online Classifieds, and listed himself as the contact.

Con man Stephen Cohen, meanwhile, was doing time for impersonating a bankruptcy lawyer. He, too, saw the potential of the domain name. Kremen had gotten it first, but that was only a minor impediment for a man of Cohen’s boundless resource and bounded integrity. Once out of prison, he sent Network Solutions what purported to be a letter he had received from Online Classifieds. It claimed the company had been “forced to dismiss Mr. Kremen,” but “never got around to changing our administrative contact with the internet registration [sic] and now our Board of directors has decided to abandon the domain name sex.com.” Why was this unusual letter being sent via Cohen rather than to Network Solutions directly? It explained:

Because we do not have a direct connection to the internet, we request that you notify the internet registration

on our behalf, to delete our domain name sex.com. Further, we have no objections to your use of the domain name sex.com and this letter shall serve as our authorization to the internet registration to transfer sex.com to your corporation.2

Despite the letter’s transparent claim that a company called “Online Classifieds” had no Internet connection, Network Solutions made no effort to contact Kremen. Instead, it accepted the letter at face value and transferred the domain name to Cohen. When Kremen contacted Network Solutions some time later, he was told it was too late to undo the transfer. Cohen went on to turn sex.com into a lucrative online porn empire. And so began Kremen’s quest to recover the domain name that was rightfully his. He sued Cohen and several affiliated companies in federal court, seeking return of the domain name and disgorgement of Cohen’s profits.

The district court found that the letter was indeed a forgery and ordered the domain name returned to Kremen. It also told Cohen to hand over his profits. It awarded $40 million in compensatory damages and another $25 million in punitive damages.

Kremen, unfortunately, has not had much luck collecting his judgment. The district court froze Cohen’s assets, but Cohen ignored the order and wired large sums of money to offshore accounts. His real estate property, under the protection of a federal receiver, was stripped of all its fixtures— even cabinet doors and toilets—in violation of another order. The court commanded Cohen to appear and show cause why he shouldn’t be held in contempt, but he ignored that order, too. The district judge finally took off the gloves—he declared Cohen a fugitive from justice, signed an arrest warrant and sent the U.S. Marshals after him.

Then things started getting really bizarre. Kremen put up a “wanted” poster on the sex.com site with a mug shot of Cohen, offering a $50,000 reward to anyone who brought him to justice. Cohen’s lawyers responded with a motion to vacate the arrest warrant. They reported that Cohen was under house arrest in Mexico and that gunfights between Mexican authorities and would-be bounty hunters seeking Kremen’s reward money posed a threat to human life. The district court rejected this story as “implausible” and denied the motion. Cohen, so far as the record shows, remains at large.

KREMEN v. NETWORK SOLUTIONS, INC.(9th Cir., 2003)

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$65 Million Judgement Against a Con Who Stole domain name of sex.com. The Con Didn't Pay and Still At Large