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New Developments in Sex.com Case

from www.domainnamewire.com – It’s a business relationship gone sour, and it doesn’t look to be getting any better. Here’s a recap in the case of Sex.com owner Escom, LLC, as well as the latest developments in this soap opera.

To recap:

-First, one of the company’s creditors, DOM Partners, pushed the company’s main asset, Sex.com, into a foreclosure auction.

-The day before the auction was to take place, three entities controlled by Mike Mann filed an involuntary bankruptcy petition against Escom, thereby halting the auction. One of the entities is also a creditor with a loan backed by the Sex.com domain name.

-DOM Partners then filed a motion to dismiss the bankruptcy case so that it could go ahead and auction off the domain name to recoup the debt.

-Mann’s entities objected to DOM Partners’ motion to dismiss.

-The bankruptcy judge decided against dismissing case, and suggested a trustee might be necessary to act on behalf of the creditors as a whole.

-DOM Partners agreed with the judge that a trustee would be necessary.

Here’s what’s new:

-Mann and Escom objected to the idea of appointing a trustee. They say the company should sell the domain name on its own terms.

-Mann invoked section 5.03 of the Escom, LLC Operating Agreement, which basically says any issues not able to be decided by the three Managers of Escom (DOM Partners, Washington Technology Associates, and Domain Name Acquisition Group) would go to the non-Managing members of Escom. All Managers would be required to submit a report to the non-managing members, who would then have authority to decide.

The two non-managing members are Nothin’ But Net, run by Mike “Zappy” Zapolin, and I-95 Investment Group. The latter is a larger member, and submitted a letter saying that it supports Mann’s and Escom’s position on the matter. DOM Partners says section 5.03 of the agreement is not valid given the current status of this dispute.

-Disagreements between DOM Partners and Mann may put a recent settlement with Sovereign Bank over embezzlement in jeopardy.

-DOM continues to claim that Mike Mann effectively controls Escom, while Escom’s CEO and Mann have said this is not true.

-Escom’s CEO claims the company’s revenue increased 194% between September 2009 and March 2010 and that the company has about $200,000 in cash.

-Communications between the company’s owners suggest that it considered a way to get a more mainstream advertiser on the site — someone “like WebMD” — in an attempt to make the web site more attractive to mainstream acquirers.

-So far Andrew Miller and Mike “Zappy” Zapolin of Internet Real Estate Group, both part owners of Escom, LLC through various holding or investment companies, have remained quiet on the case. However, tweets by Mike Mann today suggest that Mann is not on good terms with Miller and Zapolin.

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