ICANN is to terminate Registerfly’s license to sell domain names, cutting off its main revenue stream and leaving its customers victorious but nervous, after months of scandal which have rocked the company.
The domain name industry overseer chose to exercise its so-called nuclear option of de-accrediting Registerfly, saying it was frustrated and distressed by recent management confusion that has left so many customers bitter and angry recently.
The New Jersey-based registrar has been torn apart by a feud between chief executive Kevin Medina and vice president John Naruszewicz. The two men were business partners and had a 10-year romantic relationship that ended in October, according to court documents.
Naruszewicz temporarily seized control of the company with a preliminary court injunction in February, over claims that Medina was pilfering cash from the corporate kitty in order to fund an extravagant lifestyle involving expensive apartments and escorts.
This was putting the company and its customers at risk, according to Naruszewicz.
Complaints of customer domain names being lost or misappropriated and of money being taken for services not rendered were mounting, and continue to mount, at the customer activist site Registerflies.com.
Medina counter-claimed in court that Naruszewicz had become hostile and unstable after their breakup, and that he had then tried to fraudulently engineer the takeover of the company.
Medina claimed that Naruszewicz had promised to invest $500,000. He had obtained stock certificates but never actually coughed up the cash, then led a board-level coup to oust Medina as CEO and force a buyout of his shares, according to Medina’s counter-claim.
Medina won total control of the company on March 8, as the judge declared Naruszewicz’s claimed holding in Registerfly null and void.
ICANN has taken no public position on which party is in the right. Three weeks ago, it threatened to terminate Registerfly’s accreditation agreement, essentially its license to sell domain names, unless the company got its act together.
Late Friday, it delivered upon that threat.
Registerfly, assuming it does not successfully challenge the de-accreditation in court, has until March 31. After that, it will not be allowed to sell domain names or display the ICANN logo.
Terminating accreditation is the strongest measure ICANN is able to take against RegisterFly under its powers, ICANN president Paul Twomey said in a statement. ICANN has been frustrated and distressed by recent management confusion inside RegisterFly. I completely understand the greater frustration and enormous difficulty that this has created for registrants.
The big question for Registerfly’s customers now is what happens to their domain names. If somebody loses a domain name registration, their web sites and email stop working. If it’s a business site, that means lost money.
There are estimated to be a little less than a million domain names under Registerfly’s management.
ICANN has taken action to lock down all Registerfly’s customers’ domains at the registry level, so that they cannot expire and be re-registered by squatters or speculators. It has also forcibly taken a copy of what it believes to be the vast majority of registrant data.
With this data, it is possible that ICANN will be able to bulk-transfer many domain registrations to another registrar. This is its intention. (But ICANN has not disclosed which registrar will win these domains, or how such registrar will be chosen.)
Registerfly’s customers are not out of the woods yet.
ICANN estimates that a significant percentage of the data provided by Registerfly relates to domain names protected by a privacy service, ProtectFly, in which a registrar’s contact data acts as a proxy for the user’s in the Whois. It’s not clear if it’s possible for ICANN to determine who owns these domains.
Possibly a broader problem is the fact that there is likely a significant number of Registerfly customers who have not heard about Registerfly’s problems and de-accreditation. It’s not clear who will be responsible for these people being told that their domain names are now managed by another registrar.
De-accreditation is unprecedented. The number of things that could still go wrong is staggering. And it will be the biggest test to date of ICANN’s reputation as a provider of security and stability for the internet’s naming and addressing systems.