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RegisterFly fire sale at hand?

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Could troubled domain registrar RegisterFly be up for sale?

The Register has seen a copy of a letter of intent from Cogit, a technology-focused consulting group based in New Jersey, offering to buy out RegisterFly’s CEO and sole shareholder Kevin Medina for $1.15 mil. Whether or not Medina has indicated any interest in selling is another matter, and there is a continuing cloud of litigation over the struggling company that could hamper any attempted sale.

A federal court in California recently ordered RegisterFly to turn over all its registrant data to ICANN, the California nonprofit responsible for the accreditation of domain registrars worldwide. ICANN and RegisterFly are involved in an ongoing dispute over whether or not RegisterFly has lived up to the terms of its registrar agreement. ICANN recently revoked RegisterFly’s accreditation in response to an avalanche of customer complaints, and the two parties are currently in arbitration over RegisterFly’s status.

The letter of intent makes the sale contingent on Medina personally assuming liability for the company’s debts and liabilities, giving the Cogit Group a fresh start as owner. Paragraph 5 of the letter states: “Buyer shall not be obligated to assume any debts or liabilities of the Company.” Medina lives in Florida, which allows an unlimited asset exemption for equity in a primary residence; one can only assume that under this scenario Medina would be looking into bankruptcy protection, and $1.15 mil would be enough for a nice residential property, even in Miami Beach.

As of publication, calls to Cogit seeking comment had not been returned.

All of this could well be halted by court order, but sale of the registrar might not be such a bad thing for RegisterFly’s long-suffering customers. It could inject some welcome professionalism into the operation of the woefully mismanaged company, and possibly prevent its complete dissolution. Of course, the deal would have to move fast - the company would be worth less after it loses its accreditation, if that is the direction the arbitrator chooses to go. Ironically, it would also provide backdoor accreditation to yet another owner after ICANN has publicly cited accreditation through purchase as a principal cause of the RegisterFly debacle.

The Register has been somewhat skeptical of that assertion - it seems self-serving of ICANN to claim that if only it could have rejected RegisterFly’s application in the first place this would never have happened, when it took ICANN over a year to address the problem in any meaningful way, and even then only grudgingly after scathing public criticism. More meaningful reform would be to allow registrants to sue registrars individually as third party beneficiaries of ICANN’s Registrar Accreditation Agreement (RAA). That, combined with a stronger RAA, would provide the protection that registrants deserve.®

Burke Hansen, attorney at large, heads a San Francisco law office

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