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15 Apr 1999
The Sordid Saga of Sex.com
Craig Bicknell, Wired

Net porn king Stephen Cohen is a megamillionaire, and he's not shy about sharing the secret of his success.

"Let me make it real simple for you," growls the 50-year-old proprietor of the Sex.com Web site. "Our audience is not America. It's the whole world. There's only one word in the whole world that everyone understands -- sex. You type the word 'sex,' you come to Sex.com."

Problem is, Sex.com is stolen. Or so claims San Francisco entrepreneur Gary Kremen, who says that Cohen bilked him out of the name. Now he's suing to get it back.

It's a high-stakes battle on a sleazy battleground. Cohen claims that 9 million smut-seekers have signed up for Sex.com's monthly subscriptions at US$25 a pop. Even without the subscribers, Cohen charges up to $1 million a month to splash banner ads of other Net pornographers on his site's frontdoor. Discounting Cohen's self-promotion, Net porn analysts estimate that Sex.com grosses $100 million a year.

With more than 140 million pageviews a month, Sex.com -- a blindingly garish site that would put pre-Disney Times Square to shame -- has pulled away from its competitors.
None of which sits too well with Kremen.

"It was stolen, literally stolen," says Kremen, who claims he registered Sex.com in early 1994 with Internic, the domain-name registration body that is now controlled by Network Solutions. Kremen says that the most lucrative piece of Net real estate anyone could ever own was stolen by a twice-convicted felon with a cleverly forged letter to Network Solutions.

Never mind the porn on Sex.com. If even half the allegations that Kremen makes are true, the tale behind Sex.com is the most sordid in the short history of the Internet economy.

It began in 1994, when Kremen, a Stanford Business School grad, started snapping up domains he thought would prove lucrative for Web-based businesses. Among the domains he registered was Match.com, which turned into one of the Web's early money-makers. His foresight made Kremen the subject of a Wired Magazine profile in 1995.

On 9 May 1994, Kremen registered Sex.com under the corporate name Online Classifieds and listed himself as the technical contact for the domain. He began drafting a business plan for an adult-oriented Web business. "I thought it was a valuable piece of real estate."

For the rest of 1994, he put Sex.com on the back burner to concentrate on his other businesses.
Meanwhile, 200 miles south and a world away from Silicon Valley, Stephen Cohen was serving time in a federal prison in Lompoc, California.

Cohen was convicted in 1991 for posing as a lawyer in a bankruptcy court in a scheme to bilk an elderly woman's creditors out of $200,000. According to court records, Cohen assumed the identity of several attorneys, forged phony deeds and cashier's checks, and attempted to hide the woman's assets.

Cohen was sentenced to 46 months. It was his second conviction. In 1975, he was found guilty of grand theft and check kiting.

Cohen's sentence was up on 1 February 1995.

Within eight months of his prison release, Cohen controlled the Sex.com domain name.
Cohen allegedly pulled off of the domain heist with a forged letter, dated 15 October 1995, to Network Solutions, the Net's registrar. According to Kremen, Cohen duped Network Solutions by ginning up a memo on phony letterhead from a bogus executive at Kremen's company, Online Classifieds. Wired News obtained a copy of the letter from a law firm involved in a separate lawsuit with Cohen.

If the memo is, in fact, a forgery, it's a clever ruse. The letter was written and signed by a Sharon Dimmick, identified as the president of Online Classifieds. It addresses Stephen Cohen, and tells Cohen that Online Classifieds is relinquishing the rights to Sex.com to him. According to Kremen, there was never a Sharon Dimmick affiliated with any of his businesses.

The letter concludes with an instruction from Dimmick to Cohen: "Because we do not have a direct connection to the internet, we request that you notify the internet registration [sic] 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."

Armed with the letter, Cohen convinced Network Solutions to transfer the rights to Sex.com to his company, Sporting Houses Management. The transfer was completed on or about 17 October 1995.

Kremen had no idea what was going on. But on 18 October, he noticed that Sex.com was no longer his. "I woke up one morning, and it was gone," he says.

"It's like someone forging the title to your house and then taking it over," says an incredulous Kremen.

Since July 1995, it has been Network Solutions' policy that domain disputes are a matter solely between the disputing parties. Because of the policy, Network Solutions wouldn't give Sex.com back to Kremen, even after he told them he hadn't authorized the transfer. While Network Solutions declined comment on the Kremen case, it did reaffirm its basic policy.

"It's up to the two parties to work it out," says Cheryl Regan, a Network Solutions spokeswoman.
"It's insane," Kremen says of the policy. He filed a lawsuit against Cohen for fraud in the summer of 1998. He's also suing Network Solutions for doing nothing about it.

Kremen would have sued long ago, he said, but he received a call from someone identifying himself as a trademark attorney who said a lawsuit wouldn't hold up, that Cohen had the trademark on the Sex.com name. Kremen says he subsequently discovered that the "attorney" was Cohen himself.

"He called and said he was a lawyer from the Patent and Trademark Office, and that I had no case," said Kremen.

Cohen declined comment on all aspects of Kremen's lawsuit. "Anything that's of a legal nature has to go through the attorneys," he snarled. "I thought that I made that real clear to you."
His lawyers also declined comment.

In an early interview, before Kremen raised his allegations, Cohen claimed that he had been using the Sex.com name since 1979, as part of The French Connection, an electronic bulletin board he founded for "swingers, nudist camps, and alternative lifestyles." BBSs were the primary source of digital porn before the Web. Back then, he said, Sex.com stood for "Sex Communications."
Kremen dismisses the assertion as patently absurd. "There was no 'dot com' in 1979."

According to Cohen, people interested in perusing The French Connection's "Sex.com" paid him monthly, yearly, or even lifetime membership fees.

"It was a very, very lucrative business," Cohen said. "It's what became Sex.com today."

By the late '80s, Cohen had set up a real-world meeting place for French Connection swingers at a home in Orange County, California. Hundreds of couples met at "The Club" on Friday and Saturday nights to swap partners. After neighbors complained, police arrested Cohen in 1990 on charges of operating a sex club in a residential zone. Cohen moved The Club elsewhere, and the charges were dropped.

Shortly thereafter, he was convicted in the bankruptcy case and sent to prison. While in prison, he sued his wife, whom he met at The Club and later married at a swingers' convention in Las Vegas. She had been stealing funds from The French Connection, Cohen's suit alleged.

In late 1995, with Kremen temporarily stymied in his attempts to regain the domain, Cohen and four Orange County entrepreneurs dreamed up big plans for Sex.com. The grandest plan had little to do with the Internet.

In January 1996, the group unveiled its bid to buy a Nevada brothel called Sheri's Ranch and transform it into a $100 million "adult fantasy resort."

Named Wanaleiya, the Polynesian-themed resort would feature 500 exotic women who "would not hesitate to see to your comfort and pleasure." To finance the dream, the parent company, Sporting Houses Management Corporation, would sell shares to the public. It posted the prospectus for its offering on Sex.com.

Investors loved the deal, Sporting Houses claimed. That encouraged the firm to dream even bigger.

"At present, the Company is negotiating the acquisition of an entire island in the Caribbean for the purpose of developing the Ultimate Fantasy Island," Cohen wrote in a 1996 press release. "Imagine, being able to buy your own condominium on Fantasy Island."

But plans for Wanaleiya fell through. According to people familiar with the matter, neither the owner of Sheri's Ranch nor any other brothel owner in Nevada would sell out to the California upstarts. Even if Sporting Houses had found a seller, it faced huge obstacles.

The Nevada county that houses Sheri's Ranch requires that brothel owners undergo a thorough licensing investigation. It costs $2,000. If Sporting Houses had sold shares to the public, regulations would have required that every shareholder be investigated.

"They wanted to open the Caesar's Palace of brothels," said one brothel owner who declined to be identified. "But they didn't know their ass from a hole in the ground. It was a little bit like me deciding to build an atom bomb when all I've got is the casing."

It's not clear what became of Sporting Houses Management. All of the firm's former principals declined comment or hung up when contacted. One used a rather original line: "Hold on, I'm being pulled over by the cops."

Cohen, however, soldiered on with Sex.com. He began calling the operators of successful porn sites to ask how he could best develop his piece of prime Web real estate.

In May 1996, Cohen applied to the US Patent and Trademark Office to register Sex.com as a trademark, claiming continuous use of the mark since 1979. Lawyers at the trademark office bounced it back several times before making Cohen's application public in December 1997. The office publishes lists of trademark applications to give other claimants an opportunity to oppose its registration.

The registration hasn't been granted, and Kremen has formally opposed it, charging that Cohen made knowingly fraudulent statements in his application.

Nevertheless, once Cohen had filed for the trademark, he began to scour the Web looking for other adult Web sites that infringed on his trademark, and threatened them with lawsuits. That made him extremely unpopular in the adult industry.

"He went around and threatened to sue a bunch of people who had 'sex' in their domain name, and a bunch of people gave him their domains," said Seth Warshavsky, CEO of the Internet Entertainment Group, which runs several porn sites. "They were intimidated. He basically strong-armed them. The guy is really kind of a scumbag."

Said one Web-site owner who was sued by Cohen: "It cost me money to defend myself, and it cost me a lot of grief. Eventually, I decided it ain't worth the fight."

Meanwhile, Cohen supposedly sold Sex.com to a Mexican company called Sand Man Internacional, based in Tijuana. Sand Man is, in turn, owned by Ocean Fund International, a mysterious entity based in the British Virgin Islands. Sex.com's legal actions are filed under the Ocean Fund name. The last known address for Ocean Fund is Tropic Isle Building, Wickhams Cay, Road Town, Tortola, British Virgin Islands.

"We've got lawsuits filed left and right for trademark infringement," said Cohen. "We're constantly filing new lawsuits. Constantly. We have teams of lawyers at Ocean Fund who do nothing but file lawsuits."

Ocean Fund, Cohen claims, "owns a whole ton of businesses, everything from banking to hotels, construction to sex." Ocean Fund itself is owned by a publicly traded foreign bank, Cohen says. He declined to name the institution.

The reason for the secrecy is that a publicly traded bank doesn't want its depositors to know how it makes money, Cohen says. "The depositors are happy with the returns, but they don't want to know where it's coming from."

Cohen's talk of various international companies is all bluff, said one Web-site owner who's been in a legal tussle with Sex.com. "The companies don't exist, except in name. He created these shell corporations with P.O. boxes in other countries, so it's a real pain in the ass to serve him with subpoenas," said the owner.

A trademark-dispute lawsuit filed against Sex.com by Web-Depot -- a Massachusetts company that runs Hotsex.com -- claims that Cohen, Sand Man, and Ocean Fund "are the alter egos of each other."

Kremen, too, doubts whether Ocean Fund exists in more than name. He suspects Cohen transferred ownership of Sex.com outside the United States simply to put it outside the reach of US law. "It's to make it hard to go seize it," he said.

It will be up to the courts, of course, to decide whether Kremen can seize anything at all. It will be several months before the case goes to trial.

At the same time, Cohen's lawyers are marshalling a defense. In a filing to dismiss the case, Cohen's lawyers call Kremen's suit "nothing more than a hodgepodge of general and conclusory allegations thrown together, with a generous portion of scandalous and irrelevant allegations directed primarily against defendant Cohen for good measure."

Kremen, the motion claims, didn't file to incorporate Online Classifieds until 1998, "four years after it allegedly acquired ownership of the domain name Sex.com." After registering the domain, Kremen had instead incorporated under the name Electric Classifieds Inc.

"Thus," the motion continues, "Online Classifieds' allegation that it was the owner of the Sex.com URL has no basis in fact and is tantamount to perpetrating a fraud." As the supposed employee of a company that didn't exist, Kremen could not possibly have owned Sex.com.

Whether the court will be swayed by such logic remains to be seen.

In addition, Kremen faces legal precedents that work against him, according to a motion filed by Network Solutions. Kremen and Online Classifieds registered the domain in 1994, when registration was free. At that time, the National Science Foundation picked up the tab. Because Kremen paid no money to Network Solutions, the motion says, there might not be an enforceable contract. A Colorado court has already ruled against one domain holder on that basis.

"There's a lot of debate about that ruling," said Alan Davidson, staff counsel at the Center of Democracy and Technology. "That's not necessarily an argument that will hold up in every court. Microsoft got its domain for free. Does that mean it has no valid contract?"

Meanwhile, Kremen continues to start and sell new businesses, most recently selling his Web tracking firm, NetAngels, to Firefly Networks. Firefly was subsequently purchased by Microsoft.

Still, he says, the Sex.com suit constantly weighs on him. "It's terrible. It's a major drain of attention and money."

But he can't imagine that he'll lose.

"The case is simple," Kremen says. "It's about an international con man, who was twice in jail, forging a letter to Internic and taking away a domain name -- and Networks Solutions doing nothing about it."


 

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