One thing has become abundantly clear in 2009: if there’s a market, it can undermined.
Consider the following announcement from domain name registrar SnapNames on Wednesday (emphasis ours):
Recently, SnapNames.com, Inc., discovered that an employee had set up an account on the SnapNames system under a false name and, under this name, bid in SnapNames auctions. This is a clear violation of our internal policy and was not approved by the company.
…
This conduct affected a small percentage of SnapNames auctions:
· Bidding affected approximately five percent of total SnapNames auctions since 2005, most of which occurred between 2005 and 2007, before SnapNames was acquired by Oversee. To a much lesser extent, auctions in 2008 and 2009 were also impacted.
o In less than one percent of these auctions, the employee won the auction
o In the other four percent, the employee lost the auction
· The incremental revenue from the bidding represented approximately one percent of SnapNames auction revenues since 2005.
Contrary to SnapNames’ assertion, we are not convinced that five per cent of total auctions held over four years really constitutes “a small percentage”.
SnapNames further discovered that, on certain recent and limited occasions, when the employee won an auction, the employee secretly arranged to refund from SnapNames to the fictitious account a portion of the winning bid amount.
To avoid any question about whether the company benefited from this conduct, SnapNames will offer a rebate to impacted customers, including 5.22% interest (the highest applicable federal rate during the affected time period), of the difference between the prices they paid in winning auctions, and the prices they would have paid had the employee not bid in the auctions. Impacted customers will be notified by SnapNames or its representative with instructions for the offer of a rebate.
This is obviously beyond the remit of the SEC, but it serves as a timely reminder that where there’s a will — or a well-connected network of insiders or some kind of Chinese food-related code — traders will find a way to outsmart the system.
(H/T Paul Kedrosky)
Related links:
SnapNames User Name “Halvarez” Was Employee Bidding on Domain Names - Domainame News
