DomainTools Blog

One of the questions I am asked is how can you predict another RegisterFly situation. A situation where a registrar goes bankrupt and stops servicing its customers. Lots of people were left in a lurch last year when RegisterFly tech support stopped answering tickets and RegistryFly didn’t pay for renewals to the Registry. The result was that the Registry started deleting domains of the RegistryFly customers.

The best way to predict the weakness of a registrar or a possible shortage of cash is when a customer buys or renews a domain name several years out and that renewal is not paid for at the Registry. A registrar can pocket the difference of the money and nothing bad will happen. The domain will continue to exist on the Internet and the customer may not notice the date field at the Registry.

When a registrar uses the money today that is allocated for renewals five year in the future it creates an imbalance in cash available in five years. It is best for the registrar to pay for the renewal today rather then wait. The prices of DotCom continue to go up yearly and it will only hurt the registrar if they don’t purchase the renewal years at today’s rates.

I heard a customer complaining yesterday that they renewed CCCP.com until 2017 and that we were reporting the wrong expiration date. It is sad when I have to report back to the customer that their registrar is cheating them and it is not some glitch with our website. It shows weakness at their registrar and this is a very bad sign for the health of the registrar. The customer jumped up and down claiming the Registrar whois shows 2017 and claimed the registrar whois was more accurate then the Registry. Sad fact is that statement is true the Registrar is the most accurate but the Registry controls the root. The domain expires in a week at the registry and it should be auto-renewed for one more year. If the customer leaves that registrar they will not receive those paid for years. Even if the customer gets the extra year put on at the end and they decide that now is the best time to cut and run, if they jump less then 45 days after the end of the Registration that year will get deducted thanks to a 45 day renewal bug. It is not the end of the world, however this indicates an implosion event in the future at that registrar. ICANN should be monitoring for situations like these. RegistryFly can happen again! Watch for the signs.

GoDaddy.com has officaly announced that it will take over the entire portfolio of more than 850,000 generic top-level domain (gTLD) names held by RegisterFly. ICANN understands that GoDaddy.com and the gTLD registries holding RegisterFly names have worked out the mechanics for restoring, renewing, and redeeming names intending that no names will be inadvertently dropped. According to the terms of the transfer agreement, RegisterFly domain names and the data underlying the available proxy service will also be transferred. People with domain names registered with RegisterFly can contact GoDaddy.com at 480-366-3500 with any questions about the transfer. GoDaddy.com also has a question and answer sheet available at http://www.godaddy.com/welcomeregisterfly

Last week we suspected this deal was going to happen and we were the first to break the news before it was officially announced. The GoDaddy.com agreement is a direct and automatic transfer to a competent and experienced customer service oriented organization. This is a commercial arrangement and the bulk transfer process that ICANN was administering has been discontinued.

Within the next few days, RegisterFly customers should be receiving an email from GoDaddy regarding how to log in to their accounts, as well as manage their domains.

Our big question is, when will RegisterFly shutdown its website? When will it stop taking money and delivering no goods. I can’t believe the Attorney General has not done something. Kevin Medina openly accepts money for services that never delivers.

ICANN just announced that a mysterious registrar that is yet to be identified may be buying RegisterFly’s customers. We are trying to put it all together and figure out the mystery company. I just don’t see how anyone would buy the company with the amount of liability it has so the deal would be for the assets rather then the whole company. We have talked to a few unnamed sources and they tell us the unnamed registrar is GoDaddy. When I asked GoDaddy for comment they said they could not comment at this time but confirmed anyone would be stupid to buy the whole company. However, four independent sources that all wished to remain confidential said they thought it was GoDaddy as well.

This would be good news for customers of RegisterFly. Customers have been very angry about the melt down and have been demanding action. This announcement brings us one step closer to resolution of this matter. RegisterFly customers may wake up next week to an email from Bob Parsons welcoming them to his customer base.

Perhaps Kevin Medina will have enough money to pay off the lawsuits if he strikes a deal to sell his customers. This is a much better deal for him than having his customers torn away from his company. Kevin has a lot of hosting customers as well, so I think this is one of the reasons I think ICANN finds it so hard to tear customers away. They are completely at the mercy of Kevin Medina.

Here is the offical ICANN announcement:

ICANN has been advised of a deal to transfer all names in RegisterFly’s management from RegisterFly to an existing accredited Registrar with a demonstrated record of customer service. This would be a quick and effective solution to many of the problems that registrants are presently experiencing with RegisterFly. The deal, which has been confirmed with the registrar, is a commercial transaction (where the acquiring registrar has worked out a financial arrangement to take over names managed by RegisterFly).

In order to make the transfer happen, all data must be provided to the acquiring registrar by RegisterFly. We have been informed that most of the data has been now made available. Final steps are underway to effect the full transfer of information which should be completed next week, with an announcement by the acquiring registrar to be made at that time.

In related news, US Federal District Court Judge Real has compelled the personal appearance of Kevin Medina before the court on Friday, 25 May 2007 to show cause why RegisterFly should not again be held in contempt of court and be further sanctioned. Kevin Medina has not so far appeared personally in this matter. ICANN will appear, and has reserved the right to take additional action before that time pursuant to the court’s orders, particularly if the RegisterFly transfer falls off the schedule outlined above.

We will continue to update you as new information becomes available. We understand how difficult these circumstances are and will continue to concentrate on getting the best possible outcome we can for registrants.

Lawyers smell blood in the water after RegisterFly imploded and ICANN issued a notice of termination. It appears the Dummit Law Firm has been filing class action lawsuits for over 15 years and they know the power of the Internet, as they like to take on web signups for cases. They had a famous case last year when an intern working for them heard about a chemical-plant explosion in his hometown and raced to the local court house at 7am the next morning to be the first law firm to file the case. In the current RegisterFly case, they are suing not only RegisterFly but ICANN and eNom. We know RegisterFly doesn’t have any money left because they blew it on escorts and liposuction, but I think they are more interested in ICANN’s money. That actually hurts domain owners in the long run, as ICANN receives most of its funding from the sale of domain names. If Dummit was successful, the money would ultimately get paid for by other owners of domain names. Those clients in the lawsuit that were really affected might get a buck or a free domain name out of the whole deal. Class Action lawsuits are out of control in the US – the lawyers get paid hundreds of thousands of dollars. Meanwhile, ICANN will need to raise its fees and pass the cost on to registries and registrars.

As for suing eNom, eNom had handled RegisterFly as a reseller for several years, but eNom has cooperated and gone out of its way to help if a RegisterFly customer came to them and their domain names were inside the eNom registrar credential. I think by naming eNom, they are reaching a bit far. Why not sue Verisign or Afilias since, after all, they are the registries. Sheesh, I think Dummit got the facts wrong. RegistryFly reported on its website that it had Registered 2 Million domains, but as we count it, that must have been since the beginning of time. They certainly don’t have that many domain names under management. They have less than 400,000 domain in their own cred for COM and NET. And it looks like they have 500,000 names in INFO.

I feel for the victims and they should be helped, but I hate Class Action lawsuits. I have yet to hear about the criminal case. I wonder how long Kevin and John will spend in jail?

Vint Cerf, the chairman of ICANN, addressed the Registrar Constituency today in Lisbon. He asked, “At what point should ICANN get involved with a zombie (AKA walking dead) registrar? A few years ago, it was clear that ICANN would get involved in a dead registrar situation, but the line has blurred since then.” To a room full of registrars, it is a question that puts registrars on the defensive, but in light of the RegisterFly situation, the registrars were interested in cooperating with ICANN in this brainstorming session. Protecting the registrants and their domain names is a primary concern and focus of the ICANN Lisbon meeting. During the discussion, the issue of proxy registrations and how they can actually hurt, rather than protect, the registrant was raised several times.

The mechanisms that ICANN could introduce to protect the registrant could involve asking registries to report to ICANN if a registrar is having funding issues. There are early warning signs and red flags, but ICANN is currently not monitoring these signals. The time it takes for a registrant to get responses from the registrar can also indicate the health of a registrar, but registrars are not interested in getting judged or graded by ICANN. ICANN requires registrars to escrow registrant data in its current contract, however this requirement has never been enforced. The RegisterFly situation has strengthened the resolve of ICANN to start enforcing this provision of the contract, however, proxy registrations information is not required to be escrowed for safe keeping.

ICANN is collecting feedback and ideas for the next month, so if you have feedback on changes they could make, I would encourage you to voice them to ICANN.

On Friday, ICANN officially terminated its Registration Accreditation Agreement (RAA) with RegisterFly. Paul Twomey, the president and CEO of ICANN, said “Terminating accreditation is the strongest measure ICANN is able to take against RegisterFly under its powers”. However this is not the strongest measure, it is the ONLY measure. ICANN has no fines or minor corrective measures it can take against registrars. It is either the nuclear option or nothing. Registrars that abuse their accreditation face only a wimpy email or phone call from ICANN. In the 9 years since ICANN was formed, RegisterFly is the first registrar to receive any corrective actions. ICANN is aware of many registrars that don’t follow all the rules, but only has the threat of the nuclear option to correct these situations. After the 15 days notice, RegisterFly will be officially terminated on March 31st.

I visited the RegisterFly website one day after ICANN told RegisterFly to immediately terminate their use of the official ICANN endorsement logo. The first thing I saw was the logo, so I paid $9.99 via Paypal (it seems they don’t accept Credit Cards anymore) for a brand new domain and it failed to get registered. Now I’m left wondering if RegisterFly is going to refund my payment, or if I will get the domain in the next day. I will continue to monitor my order and see what happens. When I last checked my control panel, the domain was not listed. I called RegisterFly to ask about my domain but their voicemail was full and no customer service representatives were available to talk.

Name Intelligence keeps a log of every domain that is registered, deleted, or transferred. So I was curious what the last .COM domain was which was added by RegisterFly’s accreditation. From our records, the last customer to successfully register a domain at RegisterFly was Richard Nial of the UK. He registered DoubleTheSize.com on February 12th. What happens to all the customers that have registered since then? Does their money just go into a blackhole and are their purchased domains never registered? As we learn more, I will let everyone know.

ICANN has posted a public update on the RegisterFly situation we reported about earlier and it doesn’t look good. On February 21st, 2007, ICANN issued a letter to RegisterFly [PDF, 101K] indicating a Notice of Breach of its Registrar Accreditation Agreement (RAA) and demanding that RegisterFly act within 15 working days to cure the breaches outlined in the letter. Also on February 21st, ICANN sent a Notice of Audit [PDF, 60K] that required RegisterFly to allow ICANN to inspect and copy its records. In addition they were given notice to submit data to ICANN or a reputable escrow agent regarding registration applications and Registered name holders. Five days later on February 27th, 2007, ICANN sent two employees to RegisterFly’s offices in New Jersey to audit them and obtain the registrant information. RegisterFly did not compile and refused to give ICANN the Information. Two days later on March 1st, 2007 RegisterFly’s lawyers forwarded a letter [PDF, 12K] to ICANN advising that refusal to comply with ICANN’s request “should not be construed as my client’s unwillingness to cooperate with ICANN but as evidence of their continuing efforts to service their customers.” In response ICANN has issued a second letter [PDF, 288K] dated March 2nd, 2007 setting out additional breaches of the Registrar Agreement and in that letter ICANN describes RegisterFly’s refusal to comply, which was based on their “continuing efforts to service their customers“, as “preposterous“.

It seems that RegisterFly’s continuing breach of the RAA is seen as very serious, and ICANN is in hot pursuit. It is very clear that RegisterFly is about to crash and burn, and ICANN’s primary concern is to do what it can to protect registrant and related data. ICANN has provided notice that it will file a suit against RegisterFly in the United States District Court for the Central District of California seeking a temporary restraining order (TRO), requiring RegisterFly to turn over the data requested and to compel an emergency audit of its books and records. In addition to this legal action, ICANN today convened a telephone conference among those needed to implement a plan that will help cease unintended deletions. The participants were registries holding RegisterFly names: Afilias (.info), Neustar (.biz), VeriSign (.com, .net), RegisterFly backend services provider Tucows and eNom (for which RegisterFly was a reseller) as well as representatives of RegisterFly. The Registries involved have agreed to move any RegisterFly names in Redemption Grace Period status into Server-Delete-Prohibited status. This will prevent them from being deleted from the registry and becoming available for re-registration by others. ICANN commends and encourages this example of cooperation to protect registrant data.

As we reported earlier, RegisterFly is in chaos right now. We are are hearing reports that private registration in the whois, which consumers thought protected them, may do the opposite. Private registrations shields the identity of who owns the domain, which means the only company that can help you if something goes wrong is your registrar. What happens if your registrar doesn’t answer emails and will not process your renewals? This is a very real situation for hundreds of thousands of people. Customers are frustrated because they can’t prove they own their domains, and they may loose them permanently.

If a customer has a public registration or normal record, they can fax their driver’s license to another registrar and prove ownership. Once the domain leaves the old registrar where information was guarded, it would be hard to prove to a third party what happened. With a historic record of who owns what domain and when, it is easy to fight domain theft.

Further news today from ICANN – they have found RegisterFly to be in breech of its accreditation. RegisterFly has 15 days to cure the breech or ICANN will pull the plug. The signs don’t look good for the company, but this may help the customers if it is done quickly. We reported earlier that some customers had expressed suicidal thoughts out of frustrations with the company.

Reports are flying in about RegisterFly’s implosion. Registerfly’s web site went dark for most of the Monday after the CEO Kevin Medina changed the root password and locked everyone out. It started earlier in the month, on February 12th, vice president John Naruszewicz threw the first major punch by suing the CEO with a claim of misappropriation of corporate funds. The CEO and the Vice-President both own 50% of the company so they are in a dead-lock right now. It seems Mr. Naruszewicz has taken higher ground by sending Mr. Medina a letter of termination.

In the lawsuit, Mr. Naruszewicz claims Medina used company funds to buy a $6000 Chihuahua, $9,000 in escorts, $6,000 worth of liposuction, and $10,000-a-month Miami Beach penthouse. Meanwhile some customers are expressing suicidal thoughts. “I am about to lose 476 domains with registerfly,” he wrote. “In the batch of domains I am about to lose is my bread and butter domains that put food in my family’s mouthes and roofs over my employees heads… You know for a few minutes there I could relate with the people that take their own lives.” Another customer notes that even when he pays them his domains don’t renew, “.. so far 2 of my domains have been allowed to expire. They took my money for one of them, I believe that is called fraud and the other was funded in a quick checkout account, but was never processed after performing the renewal.”

Customers are livid and many have been criticizing ICANN. But Frank Fowlie ICANN ombudsman says ICANN has no power over registrars except to pull their accreditation completely. He notes that 70% of the complaints he received in the last 2 weeks were about RegisterFly. Naruszewicz flew out to meet with ICANN on Tuesday. Most likely in an attempt to save the company’s accreditation. If the accreditation is lost they will loose all their customers. ICANN is expected to make an announcement later this week.