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As
a kid who could be described as half geek and half hoodlum in high
school, Kremen didn’t look like a good bet for success. “I
got involved in the usual juvenile stuff - busting windows,
breaking into the school and trashing it as well as computer
hacking,” Kremen said. Since his parents were both teachers, you
can imagine what a source of consternation his behavior was at
home.
With
their blessing, the police department picked Gary up one day and
gave him a glimpse of what life looked like from the inside of a
jail cell. That experience had the desired effect. As a kid who
wanted to make big bucks, Kremen realized a guy’s income
opportunities could be severely limited if he was locked up.
Kremen
didn’t have the good looks or athletic prowess that insures
popularity in high school, so he looked to business as an arena
where the playing field was level, where anyone could compete
whether they were fat, thin, male, female, black, white, or
anything in between. He believed the business world was a place
where he could beat all comers and elevate the self esteem that
teenage peers sometimes mutilate.
“In
our culture one measure of success is the amount of money you
earn,” Kremen said. “While we might start with different
amounts, the change in the amount of money you have can be
compared between people. Our society is competitive and this was a
way for me to compete.”
Having
been scared straight, Kremen made it through high school and
managed to convince a highly-ranked private school, Northwestern
University in Chicago, to let him in even though his
grades were not the best. Kremen said he did it by looking at the
admissions officer as his “customer”. He understood what this
customer wanted and tailored his message to convince him that he
could deliver something that would be worth having.
| “My
grades were just a little above average, but what is
really the point of grades? To prove something to your
parents, to prove something to yourself or to show some
college that you are not as dumb as a rock? There are
other ways to prove these things,” Kremen said.
He
knew the school wanted diversity so in his admissions
essay he played up his ability to bring an entrepreneurial
zeal, inquisitive mind, technological skills and other
contributions to the classroom. It was all about
differentiating himself from the crowd and it
worked. |
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Kremen
convinced Northwestern he could add something unique to their mix
and post good enough grades to keep from embarrassing them or
himself. In
1981, he began work on a double major in business and electrical
engineering while holding down an after-class job. By the time
graduation rolled around he had done so well that multiple
corporate recruiters turned up on campus with job offers. He
decided to go with a government aerospace contractor and on that
first job he was introduced to ARPANET
(the U.S. Defense Department’s original version of the
online network that led to today’s Internet).
With
this early peek at a force that would change the world in the
years ahead, Kremen decided he wanted to bet on himself by
becoming an entrepreneur. He moved to California’s Silicon
Valley to attend the prestigious Stanford Business School and
hone his skills. In the early 90’s he began working for himself,
first selling software, then security programs for computers that
were plugging into this new thing called the Internet.
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Kremen as a
young entrepreneur
in the early 1990's
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.Com
and .net domains were just being introduced and
initially, even though they were free of charge,
Kremen was one of the very few people interested in
getting them. “I saw the future,” Kremen said,
“I could see the next 15-20 years laid out in front of
me. I knew there would be a real estate grab and that
generic domains would be BIG.”
Kremen
was also convinced that someday classified advertising
would move from newspapers to the Internet, so he started
registering names based on what he saw in classified ad
headings, picking up Jobs.com, Autos.com, Housing.com
and Sex.com to name a few (all free of charge!).
He
did open his wallet to get a domain that put his
entrepreneurial career in orbit, paying $2,500 in
1994 to buy a small email-based dating service at Match.com.
Kremen invented a database to streamline the operation and
pitched his vision for a national singles network to
venture capitalists who quickly came on board. Within two
months he had 7,000 members and a business that was
growing 10% a week! |
Kremen
wanted to take the newspapers on and expand into other traditional
classified ad areas, but his investors were satisified with the
horse they were on and he wound up being outvoted. Kremen exited
(with a huge pile of stock) and went off to seek a new adventure.
However before he had a chance to saddle back up, trouble, in the
form of a career criminal named Stephen Michael Cohen,
found him and drew Kremen into an 11-year nightmare that,
despite his sale of sex.com, isn’t over yet. He
will likely be tracking down the millions of dollars that Cohen
owes him for many years to come.
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Though
Kremen was a hell raiser in high school, he was a choirboy
compared to Cohen who grew up in a broken home in Van
Nuys, California (an L.A. suburb in the San
Fernando Valley). In 1995, Cohen (who was 46 years old
at the time) was released from his latest jail term, this
one a 46-month stint in federal prison for fraud. His rap
sheet already included such niceties as failure to pay
child support (for a daughter who later became a police
officer), passing bad checks, car theft, forgery and grand
theft. Cohen’s criminal trail was littered with five
ex-wives along the way.
Just
months after Cohen got out of prison in 1995, Kremen
learned that the registration for his valuable sex.com
domain had somehow been switched into Cohen’s name. It
was later learned that Cohen had forged documents that
convinced registrar Network Solutions to transfer
the domain to him. He then quickly shuffled the domain
through a string of corporate entities to try to cover his
trail. |
Stephen Michael
Cohen
1966, Van Nuys High School
|
Partly
because Kremen had registered sex.com at no charge, Network
Solutions showed no interest in helping him get the domain back.
Kremen filed suit against Cohen and Network Solutions and began a
six-year battle to get the domain back, a battle that would drain
him financially and emotionally. He went through $5 million
in legal fees, a mountain of money that included not only his last
dollar at one point, but the last dollars of investors who had
agreed to help bankroll the litigation in return for a share of
sex.com if and when it was ever recovered.
As
the fight drug on year after year, the investors bailed out.
Attorney Charles Carreon helped keep Kremen in the fight by
agreeing to represent him and take payment only if he won. In
2000, another lawyer, Jim Wagstaffe, joined Kremen’s
legal team as the lead attorney. Wagstaffe documented that Cohen
has already moved $25 million in earnings from sex.com
offshore. He was reportedly making $750,000 a month in pay
per click and affiliate revenue earnings from the stolen domain.
Finally, on Nov. 27, 2000, the ruling Kremen had hoped for was
handed down. A judge ordered that sex.com be returned to him and
that Cohen pay him $65 million in damages and stolen
revenue (with interest constantly accruing, that figures stands at
approximately $83 million today).
The
judge’s decision was Cohen’s cue to flee the country and live
off the money he had stashed around the world. Amazingly, on the
same day the decision came down, Cohen was able to transfer
another $1 million offshore while no one was watching.
Having won the battle, but seemingly lost the war (with Cohen and
his assets still out of reach), Kremen fell into a period of
depression that led to drug abuse, a habit he was fortunately able
to kick with support from his family.
|
Gary
Kremen
-
2006 |
Despite
the hell Cohen has put him through, Kremen isn’t crying
over spilled milk. To the contrary he says some positive
things have come out of his experience. “You can look at
a glass as half full or half empty,” Kremen said. “I
see it as half full. My life could have been much
better without Cohen in it, or it could have been much worse!
I actually learned a lot as a victim. I learned a lot
about people’s character and a lot about the law. My
life wouldn’t have been as full if I had not been
a victim!”
Still
Kremen is only human and there were times he questioned
whether he should continue the fight. “I did think of
throwing in the towel, but only when I thought chances of
recovery were low. I will actually stop my efforts if they
are not worth the potential return,” Kremen said. |
The
cards did start falling Kremen’s way in late 2001 when the court
handed him the first major asset Cohen had purchased with sex.com
earnings, a 8,900 square foot 6-bedroom mansion in San Diego’s
exclusive Rancho Santa Fe community. The house remains
Kremen’s home today, though he splits his time between the
3-acre estate and his business office in San Francisco where
he runs his own PPC search engine, GrantMedia.com.
By
the time Kremen got sex.com back, the internet bubble had burst.
He did earn about $500,000 a month the first few months
after the domain was returned to him, but revenue quickly fell off
after that. With the domain business entering what turned out to
be a three-year downturn, Kremen’s hope rested on recovering
more of the assets Cohen had bought with his money and collecting
damages from the registrar that had handed his domain over to the
criminal.
| He
succeeded on the latter count in 2003 when Network
Solutions agreed to a settlement with him that was
reportedly worth close to $15 million. With those
new resources he continued his pursuit of Cohen and his
assets. Cohen had been spending a lot of time in Tijuana
and due to Kremen’s persistence, Mexican authorities
finally took an interest in the fugitive and arrested him
on Oct. 27, 2005. He was turned over to U.S. authorities
who promptly moved Cohen to a Silicon Valley jail cell
where he remains today.
You
might think Kremen would take special delight in Cohen’s
current situation but that is not the case. “Actually I
am sorry it has lead to anyone being in jail. It’s very
sad because it did not have to come to this,” Kremen
said. “I don’t believe much in retribution. It
doesn’t get you as much as you think it does.” |
Stephen
Michael Cohen's current home,
The Elmwood Men's Correctional Facility
Milpitas, California |
Kremen
was recently awarded ownership of a shrimp farm Cohen had in
Mexico, as well as a minority interest in a Mexican strip club. He
has also recovered two parcels of Tijuana land but the vast
majority of the assets Cohen acquired with sex.com money are still
unaccounted for and Cohen is not cooperating with authorities
trying to locate them. That leaves him in contempt of court and
undergoing a slow rot in jail until he decides to start singing.
In
the meantime, Kremen decided it was time to part company with the
domain name that had made his life both rich and wretched. In
January he accepted an offer from a Boston-based group (Escom
LLC) to sell sex.com in a deal he told us was structured to
give him approximately 90% in cash and 10% in stock.
Kremen said the package was worth a minimum of $12 million
to him and could wind up being worth as much as $20 million
depending on how the stock component performs. Whether you take
the high figure or the low one, it would be the biggest pure
domain sale of all time (revenues produced by sex.com came from
the inherent type-in traffic attracted by the name itself – it
was never a business that sold products or services directly to
the public).
So
why did he sell? “I realized that the value of sex.com as a brand
name was actually worth more than the current type-in revenue
value of the domain,” Kremen said. Sex.com accounted for 10 to
20% of GrantMedia.com’s total traffic, but Kremen was able to
quickly restore a significant portion of that traffic by
purchasing a portfolio of 4,000 domain names with part of his
proceeds from the sale. “I plan to keep at least one foot in the
traffic space and my business is more non-adult than adult now,”
Kremen said.
While
he didn’t specify the multiple of earnings that Escom paid for
Sex.com, Kremen said he personally wouldn’t pay more than 4-5
times annual PPC revenue for a domain because the future of
technology was too uncertain. In the adult arena, he said he
wouldn’t pay more than two times earnings because the category
has very limited exit opportunities due to there being fewer
buyers in the space (one that is shunned by public companies for
obvious reasons).
In
addition to his windfall from sex.com, Kremen still owns sex.net
and also has a trademark on sex.xxx, even though he
believes the proposed .xxx extension will never go
anywhere, even if it does eventually become part of the domain
name system.
The sex.com
battle hasn't killed him, so Kremen says he is only
getting stronger! |
He
can also look forward to the likelihood that his story
will one day appear in bookstores and possibly even in a
motion picture (if that happens Kremen thinks Jack
Black would be a good choice to play him). Michael
Gross has already written a very well researched and
highly detailed article titled "The Taking of
Sex.com" that appeared in the February 2006 issue
of Playboy Magazine. His account (which
includes his own face to face encounter with Cohen before
he was arrested in Mexico) has all of the elements needed
to write a top notch screenplay about the biggest theft in
Internet history.
Though
a lot has already been said and written about him and
sex.com, Kremen said his story is just beginning. “Nietzsche
said that which does not kill you makes you stronger and I
think that is true,” Kremen said. “Learning new and
old things and proving myself up to a task is good for
self esteem. I have a lot more to prove in my life – stay
tuned!” |
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