Peter’s Blog

I received an email from Snapnames today. I was a bit surprised as it was not the normal announcement that my domains were going to expire (they never end lol). Snapnames has had the need to come clean bout their Snapnames service.

It seems that an employee of Snapnames has been bidding on auctions using a faked account to drive prices up. What is more they have been ciphering money from refunds.

Lets take a look at the email they have been supplying:

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: (EDITED BUT SNAPNAMES EMAIL)
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

As you can see they have stated that since 2005 roughly 5% of all auctions have been affected. What seems puzzling is that they are telling us how many have been affected since 2005 however they also stated that the majority of the bids were placed between 2005 and 2007. So if 5% of auctions have been affected since 2005 and most were between 2005 and 2007 what is the real figure of auctions affected between 2005 and 2007. This could potentially be in excess of 10% (of course we cannot make real judgment here as they have been avague and we do not know the amount of auctions in these periods).

What is more disturbing is that hey have also admitted that on recent auctions that this individual refunded a portion of the winning bid to a fictitious account. What is not clear is did they actually purchase the domain and refund himself or did he cancel the transaction and still refund money? Either way this employee has committed fraud.

People have been suspecting that this has been going on for a long time of course Snapnames (and to be fair other auction houses) have denied this goes on. Maybe they should not have been so quick to dismiss what people have been telling them for a long time.

This is a very bad day for Snapnames. Now that the news has been broke people will be extremely reluctant to trust their brand.

1 positive can be taken from this however. Snapnames have openly released this information, they do not (on the face of it) been forced to disclose this. Not only this but they have already proposed a resolution to resolve the issue.

As can be seen from the email they have proposed that they refund every customer who has been affected including 5.22% interest. Unlike many other companies who tend to insist that you take the refund as credit, Snapnames are actually offering this as a cash refund.

It will be interesting to see what they are going to be doing with refunds that are due for customers who’s details are now out of date. Some customers who were affected in 2005 for example may not use their registered email address and the chances are payment details will have changed.

Hopefully Snapnames have learned a lesson or 2 and have tightened up security on their platform. and hopefully they have analyzed auction behavior to see if there is any evidence of anyone else doing anything similar. Now how long will it be before we have announcements from Sedo, Afternic and {insert other domain houses here}. I do not believe that this is the end of the issue. How many companies have quietly swept the issue under the carpet?

Tags: Address, Auct, Auction Winner, Auctions, Bid, Email, Extent, False Name, Fictitious Account, Incremental Revenue, Instances, Lol, Money, Moniker, Occasions, Remedy, Snapnames, Unfortunate Incident

This entry was posted on Wednesday, November 4th, 2009 at 9:21 pm and is filed under Domaining, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.