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Domain theft arrest by State Police called first in U.S.

Photo Credit: Cliffview Pilot
Photo Credit: Cliffview Pilot

YOU READ IT HERE FIRST: N.J. State Police have charged a computer tech with snatching a domain name off GoDaddy.com and selling it for $110,000 on eBay, in what is believed to be the first arrest for domain theft in the United States.


Daniel Goncalves, 25, sold the domain name P2P.com three years ago to the NBA’s Mark Madsen, said State Police investigators, who seized business and computer records while charging him with various theft counts.

If the charges prove true, Goncalves picked the wrong targets: One of the original owners of P2P.com is a well-known millionaire and the other is a former Justice Department lawyer.

“The domain name industry is in some respects still like the Wild West,” said State Police Supt. Col. Rick Fuentes. “Many of the rules are not yet codified into state laws, let alone federal or international laws.” However, he said, “theft is theft.”


Goncalves

“Domainers” are a large community of people who buy and sell domain names that they speculate will become more valuable over time.  Two- and three-letter names are particularly valuable: They’re easy to remember and produce lots of traffic.


P2P, LLC was originally formed expressly for the purchase and management of P2P.com by investors who have built a portfolio of nearly 1,000 domain names.

“Because of its short length and topical relation to the exploding Peer-to-Peer file sharing phenomenon, P2P was particularly valuable, with an estimated value of between $160,000 and $200,000 at the time of its theft,” State Police Sgt. Steven Jones said this afternoon.

As it turned out, one of the co-owners, Marc Ostrofsky, is an industry pioneer who sold Business.com for $7.5 million, while one of his partners, Albert Angel, is a former U.S. Justice Department attorney. They did some investigating of their own after discovering in May 2007 that someone transferred the domain name from their GoDaddy account a year earlier, Jones said.

The group had been tracking Goncalves — who works for an online research firm and has his own business hosting sites — for some time before contacting State Police last fall after Florida authorities declined to pursue the case.

NJ State Police Detective Sgt. Dan Gorman analyzed thousands of pages of evidence from the owners that helped lead to Goncalves’ arrest last week, Jones said.

Records obtained from GoDaddy, the world’s largest domain registrar, verified that the same IP address that was used to log into the company’s account and initiate the transfer was Goncalves’, the sergeant said. A published report says Goncalves hacked into the company’s AOL account to gain access.

Attempts were made soon after to transfer the domain name to a different registrar. However, rules by ICANN (Internet Corporation for Assigned Names and Numbers) prohibit such a move for 60 days. So Goncalves maintained p2p.com in his own account, Jones said.

Goncalves moved the domain name to a different registrar. Reports say he used his fiancee’s maiden name, Louvado, more than a week after the 60-day GoDaddy transfer prohibition was concluded, authorities said .

Goncalves again waited the mandatory 60 days before listing the name for sale on eBay, where it was bought for just over $111,000 by Madsen of the Los Angeles Clippers.

Goncalves, who lives in Union Township in Union County, remains free on $60,000 cash bail.

Meanwhile, the original owners are still waiting to reclaim the name through civil litigation involving ownership and profits, Jones said. They have included GoDaddy.com as a defendant in their lawsuit, claiming negligence and contributing to trademark infringement.

Why aren’t more of these cases prosecuted?

“Cases of domain name theft have not typically involved a criminal prosecution because of the complexities, financial restraints and sheer time and energy involved,” says a report on Domain Name News . “If a domain name is stolen, the victim of the crime in most cases would need experience with the technical and legal intricies associated with the domain name system.

“To move the case forward, they would also need a law enforcement professional who understands the case or is willing to take the time to learn. For example, the Angels told us that in their case they called their local law enforcement in Florida who sent a uniformed officer in a squad car to their home. The first thing you can imagine the officer asked was, ‘What’s a domain?’

“Additionally, financial restraints play a major role,” the report says. “Often times the rightful owners of these domains simply can’t justify the thousands of dollars in legal fees necessary to handle a case like this. Domains that don’t have the sort of value that a domain like P2P.com has in the aftermarket may still contain a value that only the original owner can appreciate. Good luck convincing a law enforcement professional that your domain name is valuable under those circumstances. It’s likely that many small business owners faced with this situation would simply give up.”

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