SnapNames and its parent company, Oversee.net, have filed suit against Nelson Brady in federal court in Oregon.

The situation came to light when the former employee improperly bid in certain SnapNames auctions by way of an account registered under a false name. In October 2009, Oversee discovered that Brady, using the alias “Hank Alvarez,” engaged in improper bidding activities in domain name auctions on the SnapNames platform. In some cases, Brady also appears to have embezzled funds from Oversee by fraudulently refunding himself a share of the purchase price for names he won.

Oversee and SnapNames disclosed the situation to its customers and employees the following month.  Oversee made a cash rebate available to affected customers in the amount overpaid in addition to 5.22% interest (the highest applicable federal rate during the affected time period). This solution repaid customers any amount exceeding what the auction price would have been without employee bidding.

For several months, the company has in good faith attempted to settle privately with Brady to recover its losses, including the rebate fund established by Oversee to address Brady’s activities and the funds he embezzled.  Those settlement efforts have been unsuccessful.

The suit seeks over $33 million in damages, including punitive damages--but in a marketplace where trust is crucial component, no amount of money can compensate the damage Brady may have caused to SnapNames’ and Oversee’s reputation.

In November 2009, Oversee voluntarily disclosed Brady’s conduct to both the US Attorney’s Office and to the Federal Trade Commission.  The company will not publicly discuss anything relating to law enforcement matters.