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from www.thewhir.com — Domain name auction site SnapNames (www.snapnames.com) has been served with a class-action lawsuit for shill bidding, after the company revealed that a former employee was found bidding against potential customers in domain name auctions, according to a report by PC World.
The lawsuit was filed in Miami-Dade County Circuit Court on Monday by attorney Santiago Cueto, who is representing his brother, Carlos Cueto, and other participants of SnapNames’ online auctions.
According to the lawsuit documents, Carlos Cueto and company allege that SnapNames’ former vice president [Nelson Brady-pictured] bid on tens of thousands of domain name auctions over the past four years, unbeknowest to the public, which eventually caused prices to inflate.
Carlos Cuerto says he has long suspected shill bidding in some domain name auctions run on SnapNames, which hosts hundreds of auctions for expiried domain names a day.
SnapNames notified customers last week that it found out that one of its employees was bidding against other participants in hundreds of domain name auctions, which affected about 5 percent of all auctions since 2005.
The majority of this practice occurred between 2005 and 2007, although some auctions in 2008 and 2009 were affected by the shill bidding, says the company, adding that the former employee only managed to win the auction in less than 1 percent of the circumstances.
The former employee activated a fake account and screenname under the SnapNames system, which the company says is a “clear violation of [its] internal policy”.
The company has already said that it will hand out rebates to those customers who were affected by the shill bidding, which will be determined by on a case-by-case basis by an independent auditor.
So far, Carlos Cuerto is the only plaintiff named in the lawsuit, but his brother expects that other affected individuals will soon join.
The law firm will also investigate into taking legal action against other companies that have been suspected of engaging in similar activity.