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Sunday Times article version two

Category : Internet, Journalism, Sex.com · by May 26th, 2007

You should read this blog post before you delve into this piece.

“The Internet? The Internet is for porn!” exclaimed one of the speakers last week [18 May 2007] as the Oxford Union debated the question “This House believes that the Internet is the greatest force for Democratisation in the World”.

Professor John Palfrey of Harvard University was speaking against the motion. And although his point was tongue-in-cheek he accurately reflected an enduring situation with real-world use of the Internet. The Internet is for many things, but one of the biggest is, undoubtedly, porn.

A quarter of all search-engine requests are for pornography, at least a fifth of adults online have accessed a porn site, and there are an estimated 400 million Web pages out there catering for the demand. The adult industry is worth $57 billion worldwide, and the United States –the world centre for pornography – claims $12 billion of it.


It is with some irony then that one of the men most associated with Internet pornography is due in court next month to explain where the millions of dollars he has made from the industry has gone. But as with most things in Stephen Michael Cohen’s life, nothing is as it first seems.

Most of the US porn industry is centered around Los Angeles and it was in the City of Angels that Stephen Cohen, a lifelong con-man who was to battle his way to the top of the online “adult industry” before being dragged unceremoniously from his throne, was raised and spent most of his life.

The man who was to be responsible for ruining him also lived in California – 300 miles north in San Francisco – but could not be more dissimilar. While Cohen left high school and a broken family with no qualifications and only his cunning to survive on, Kremen was a star pupil, the son of two teachers, who gained two degrees before taking an MBA course at Stanford and made a living in the emerging computer market, being one of the first few thousand people to use the precursor to the Internet, ARPAnet.

Cohen was 15 years old in 1963 when Kremen was born. By the time Kremen was 15, he was already on a determined life of crime, specialising in “paperhanging” or passing bad cheques, and charming his way in houses, bed and bank accounts with ready abandon. By the time Kremen was at college and playing around with computers, Cohen had become an expert in company law, was on his third wife, had been in court for running a sex club and was being sued for being one of the world’s first software pirates.

Cohen was intricately tied in with the Californian swinging scene and dreamed of making it big in the blossoming pornography market. Meanwhile, Gary Kremen was the least likely porn baron the world has ever seen, a shy computer engineer with a management degree who struggled to get a date. Even so it was Kremen and not Cohen that actually owned the Internet address that was making Cohen one million dollars a month.

Kremen had registered it when 99.9 percent of people had even heard of the Internet, in May 1994. Cohen had stolen it, ingenuously, in September 1995. It was the most valuable real estate that existed and still exists on the Internet today. It was sex.com.

As difficult as it may be to believe, it was only 12 years ago that those outside a small circle of academics, computer engineers and US generals first heard about the Internet.

The network had been built over 20 years by engineers working for the US Department of Defense’s advanced research department looking for a communication system able to survive nuclear attack. It then spread rapidly through universities, who marveled at how they were able to send papers to colleagues halfway across the world in seconds.

But it was, inevitably, money that brought the Internet to the rest of the world’s attention. On 14 September 1995, the company that had control of all “dotcoms” – Network Solutions – started selling domain names for $50 a year (previously they had been free). It had been registering around 10,000 a month for a few months, but suddenly it was selling 30,000 a month, and then a few months later, 100,000. From nowhere a billion-dollar industry had appeared – and all for addresses on an invisible computer network.

Just as inevitably it was the pornography industry that was the first to recognise the potential of this new network and start spending huge sums of money making sure that people were able to get hold of their wares from the comfort of their own homes. But since these were the days before Google, most people looking for pornography on the Internet simply typed in s.. e.. x.. .com and hit Return.

Stephen Cohen saw this immediately and just three days after Network Solutions started selling the domains, he had managed to manipulate the computer system used to register domain names, and then over the phone convince someone at the company that the change was correct. He walked away with the Internet’s Holy Grail, the most valuable real estate on the computer network – sex.com.

He then covered the website with ads for other porn sites and sat back as millions and millions flooded in. It provided him with the life he’d always dreamed of: rich, powerful, with a beautiful mansion in the hills outside San Diego, and a coterie of young, pneumatic women for his pleasure (although his fourth and fifth wives were not so keen on the last aspect).

For Gary Kremen, the theft of the domain gave him the fire for a fight. A fight that was to take him six years and millions of dollars to win but which remains unfinished even now as Stephen Cohen has failed to hand over one cent of the $65 million judgment against him. With so much at stake, the case took over both men’s lives and also sucked in those of their friends, families and employees.

For a while it also made the US legal system and the Internet itself sit up and take notice. Twice referred to the US Supreme Court and considered by the Court of Appeals no less than four times, the case ended with a ruling that will forever alter development of the Internet. It decided that the addresses on the Internet could be considered “convertible” property and that they could be stolen. Amazingly, before Kremen’s epic five-year court battle, the law considered “amazon.com” or “google.com” and even “sex.com” as little more than a telephone number, despite the fact that Kremen personally brokered the sale of “altavista.com” for $3.35 million. No one had ever paid $3 million for a telephone number.

It that fight wasn’t enough, it all happened in the period of temporary madness that we now call the “dotcom boom” where fortunes were made and lost faster than at any other time in history. Where a website that sold cheap flights was at one point valued at more than the entire US airline industry; where people would wake up to find they were billionaires and then discover a few months later they were bankrupt.

But even among all the extraordinary tales of the Internet, the fight for sex.com stands out. Like a modern-day retelling of the Trojan War with Gary Kremen’s Menelaus chasing the most beautiful woman (or, rather, website) in the world and laying siege to Cohen’s Paris, it was a long and bitter fight.

In June 2001, reports started to appear that Stephen Cohen was in fear of his life after two bounty hunters had come looking for him at his Tijuana home. A gunfight with the Mexican police had ensued. The bounty hunters were in pursuit of a $50,000 reward posted by Gary Kremen and which had featured in news media across the world.

What is all the more incredible is that the gunfight never happened. It was instead an extraordinary lie invented by Stephen Cohen to put Kremen on the backfoot and make the judge angry with him. The lie took months to unravel. Another of his lies, this time over how he actually stole the domain, took years and an entire court case centered on it to be revealed. Stephen Cohen, you see, is a con-man. A very, very good con-man.

When you hear him speak, it is easy to see how he has made a career from ripping people off. The lawyer that would finally win the case, a star attorney called James Wagstaffe, explained that one method he used during the case was to listen only to Cohen’s words and not to him. “If you listen to him, you believe what he has to say.” Such is the confidence of his delivery that even Gary Kremen confessed that the first time they actually met – over dinner in the middle of the case – “I almost believed it was me that had stolen sex.com from him.”

But despite Cohen’s extraordinary talents, Kremen’s ceaseless determination to beat him won out, but not before Kremen had stared ruin in the face, spending the very last chunk of money he had from cashing in shares that he hadn’t even paid the tax on. He also overcame a crippling drug addiction to crystal meth that had both helped him party and to lift free of the pressure of the battle over sex.com.

US court actions are extremely expensive, and Kremen couldn’t afford to start one. But civil war in the adult industry thanks to Cohen’s action provided Kremen with some early funds from Cohen’s rivals. That challenge fell apart, and was only saved at the last minute by Kremen’s canny investments in Internet start-ups that paid off handsomely during the dotcom boom.

The second challenge nearly collapsed as well, as Cohen had hired the best lawyers money could buy to destroy the case. But finally, the third charge saw Kremen handed Sex.com and then awarded $65 million. Except he never saw a cent of it. Instead, Cohen fled the country and moved all his money to offshore accounts, which Kremen is still chasing to this day.

What Kremen did get however was Cohen’s house: a mansion in the exclusive Rancho Santa Fe district of San Diego. Cohen couldn’t wire a six-bedroom, eight-bathroom mansion to a Swiss bank account and so, after months of vicious fighting, Kremen eventually won control of it. When Kremen turned up, he found a multi-million-dollar calling card: Cohen’s henchmen had completed destroyed his old home, including pulling out all the toilets and plumbing, wiring, carpets, even trees in the garden.

It took another four years from that point but eventually Kremen got him. Stephen Cohen was arrested just over the Mexican border in Tijuana while trying to renew his visa. He had been made a fugitive from justice four years earlier for failing to turn up in court, in direct violation of the judge orders. Kremen had only met Cohen once before, but a few weeks after Cohen’s arrest, he was in a small room facing him. Cohen made it clear he was unbowed: “In all the years you’ve been chasing me, you have never got a single asset in my name. And you never will.”

And despite another year in jail, during which time Kremen and his lawyers tore into every bank account and property trying to find where Cohen’s estimated hundreds of millions are kept, Cohen was right: they couldn’t find the money.

They’re still trying. And Stephen Cohen is still delaying, hoping that at some point they will give up. He is no longer in jail but he is due in courtroom eight at the end of June in the District Court of San Jose to explain where the money has gone. Kremen won’t be there. But his lawyers will.

Kieren McCarthy’s Sex.com details for the first time the extraordinary battle for sex.com. It is out on 21 May 2007. A supplementary website to the book can be found at http://www.sexdotcom.info.

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(2) comments

Recent Sale, Book Highlight Value of Sex.Com and Porn.com Domain Names…

It’s a sad but true fact that seedy domain names are among the most valuable on the Internet. A recent story set to be printed in the UK Sunday Times explores about the utter skullduggery around the sex.com domain name, which was stolen by Stephen Mic…

[...] And the commissioning editor didn’t like it. But she was very pleasant about it and didn’t say “I don’t like it” but offered some other feasible reason. I agreed to rewrite it. So I wrote another version. I like this version too. Anyway, at 8.15pm, I get an email on my Blackberry saying that the piece was ready to go, they had made a few changes, but if I have any problems please call – she’ll be there until 10.30pm. My Blackberry would only show the first four paras or so, but it was clear it has been comprehensively rewritten. I asked her to add whoever had rehashed it to the byline. She said, no it was fine. [...]

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