Things were looking bad enough for Stephen Michael Cohen back in November, when he lost ownership of the domain name sex.com.
But that was just the beginning. Now, Cohen stands to lose income generated from sex.net, kinkymate.com, nastydate.com and a list of more than 80 other predominantly porn-related domains registered under his name.
Those are the terms laid out in a Friday ruling from a federal judge in San Jose, California, who authorized a legal advisor to collect income from any of Cohen's Web businesses to raise money for lawsuit damage payments.
In his ruling, Judge James Ware said the court would "take custody of any proceeds generated from the operation of any Internet domain name for which Stephen Michael Cohen is listed either as a technical, administrative or billing contact."
The money is to be put into a court-supervised account pending final judgment in a lawsuit filed against Cohen by San Francisco entrepreneur Gary Kremen.
The ruling marks the latest turn of events in a two-year legal battle over the domain name sex.com, one of the most valuable pieces of real estate on the Internet. Like other recent rulings in the case, it was not a positive development for Cohen.
Cohen, who ran the sex.com website from 1995 until 2000, lost a key ruling in November that took the domain out of his hands. At that time, Ware ruled that Cohen had gained control of the coveted Web address illegally, by sending a fraudulent transfer letter to domain name registrar Network Solutions. The judge ordered the site returned to its original owner, Kremen.
As part of the November decision, Ware also ruled that Kremen be awarded some damages to make up for the years he lost control of sex.com. The site, a flashy collection of pornographic banner ads, is believed to generate millions each year for its operator.
To help figure out how much Kremen is entitled to, the judge ordered Cohen to provide a full accounting of the financial operations of the sex.com site since 1995. Ware also ordered Cohen and the Ocean Fund, a corporate entity he is believed to control, to provide $25 million to be held by the court pending final judgment and assessment of damages.
So far, however, Cohen hasn't come up with the $25 million. Kremen's attorneys charged that Cohen also won't answer their questions about the location of his assets and is attempting to hide information about proceeds from the sex.com domain.
To help sort out the mess, Ware appointed a special advisor -- Palo Alto, California, attorney George C. Fisher -- to assist the court in locating Cohen's assets.
Fisher's job will be to find and secure custody of all sex.com-related assets controlled by either Cohen or the vast array of corporate entities he operates. Once assets are identified, Ware will be able to figure out what kinds of damages Cohen will have to pay.
Attorney Jason Epstein said it's not unusual for judges to take such steps in complex cases involving recovery of assets.
"When you're in litigation and it looks like you're hiding assets, the court can freeze your assets," said Epstein, co-founder of the e-business group at the law firm Baker Donelson.
He said it's also routine for courts to freeze assets in ventures that have nothing to do with the case, as Ware is doing with Web properties that Cohen operates separately from sex.com.
Even so, the idea of freezing assets in a domain is an unusual one.
In the sex.com case, however, it helps that the majority of Web businesses under Cohen's control are porn sites, which have the reputation of being far more profitable than the average dot-com.