In an e-mail this morning, SnapNames CEO Jeff Kupietzky and general manager Craig Snyder notified SnapNames customers that an ex-employee was involved in up to 5% of auctions between 2005 and 2007. They have also announced a reimbursement program for some of the affected customers. Customers who won auctions where the ex-employee is believed to have bid up the price will receive a refund of the difference with interest. I spoke to a SnapNames employee this afternoon who confirmed that the fired employee was in fact Nelson Brady who used the handle ‘halvarez’ when bidding on SnapNames auctions. A photo of Nelson Brady is available on DNjournal here.

For the sake of full disclosure, I have been a customer of SnapNames since 2002 and bid in many auctions against ‘halvarez’.

There are a few questions that were left open by the e-mail from SnapNames, most importantly why they will only be notifying customers who won auctions. It seems to many an equal loss for customers who lost domain auctions to the ex-employee. The other question is whether or not SnapNames will attempt to reclaim the domains won by the ex-employee.

Earlier this morning I spoke to Mason Cole, VP of Communications for Oversee.net. He was unable to comment on many questions because of ongoing legal and criminal actions, but he did reiterate that SnapNames has had an ongoing policy that prohibited employees from participating in SnapNames auctions. I am waiting to hear back from him about whether or not customers who lost to ‘halvarez’ will be notifiied, in addition to customers who won.

It was just last month that we published an article about trusting domain auctioneers, and this timely disclosure by SnapNames must be giving customers pause. The good news is that disclosures such as these, especially if SnapNames discloses to customers the entire extent as it involves that customer, are a very positive sign. Full and relevant disclosures are consistent with ethical business practices and show a strong desire to be honest, regardless of the cost to the organization, and SnapNames should not lose any customers over this incident. In fact, one SnapNames customer I spoke to will be returning to SnapNames because ‘halvarez’ is no longer bidding.

I did some research on domains won by ‘halvarez’ at SnapNames, and they point to two different addresses:

2661 N Pearl St #255
Tacoma, WA 98407

and

2346 NW Clarion Suite 303
New City, NY 10956

The first address located in Tacoma is a UPS store that sells mailboxes. The second address does not appear to be valid, according to Google maps. However, the e-mail address associated with both of those addresses, domainqueue@gmail.com, has 6591 domains associated with it according to DomainTools. The Tacoma address makes geographic sense because SnapNames was based in Portland, OR, only two hours by car from Tacoma.

According to DomainTools, Nelson Brady was listed as the primary whois contact for the snapnames.com domain from 2002 until February 14th, 2007.

Many are speculating about the motivations and strategy employed by Brady. Some have accused him of being involved in auctions for any domain where he saw one other bidder. Others have accused him of utilizing the SnapNames parking statistics to determine which domains to bid on and how much to bid.

Tracking some of the halvarez domains indicates that he may have sold a significant portfolio to iREIT in November 2006, although a call and e-mail to iREIT were not returned as of this writing. If Brady was focusing on traffic domains, purchasing with insider parking information and then flipping them to iREIT would make for a rock-solid business model.

For many customers the SnapNames website has added frustration to the matter. Sometime in the last year SnapNames removed auction history from before December 2007 which prevents customers from conducting their own investigation into the impact of this fraud. Ironically, it was SnapNames saving the auction histories that set a higher standard for transparency in the domain aftermarket. Perhaps SnapNames could continue to show their committment to openness and transparency by re-posting the historic auction data.