WOODLAND HILLS, Calif.—The San Fernando Valley Division of the U.S. Bankruptcy Court today approved the sale of Sex.com, the domain still held by Escom LLC, which was forced into an involuntary bankruptcy by creditors in March of this year in the same Woodland Hills court.
According to today’s order, the $13 million sale may proceed, but a portion of the sale price will be withheld pending the resolution of a motion filed by creditor Nothin’ But Net, which complained about the divvying up of the proceeds, and accused investor Mike Mann of “self-dealing.”
The Nuthin’ But Net motion, filed Oct. 17, claimed, “Mann, through a series of self-dealing transactions, essentially gave away Escom’s most valuable rights to iEntertainment (i.e., to himself) and then had Escom ‘buy back’ those rights from his wholly owned and controlled subsidiary, iEntertainment, in exchange for a $2.5 million secured note (the “iEntertainment Note”). The ultimate, and clearly intended result of this shell game, was to allow Mann to reap a disproportional recovery upon Escom’s sale of its assets, primarily at the expense of NBN, which the Debtor presently owes approximately $2,337,562.39, but which NBN will not recover if Mann’s self-dealing is sanctioned.”
The court apparently took those claims seriously enough to set aside an appropriate percentage of the sale price tendered by St. Vincent-based Clover Holdings Limited. Today’s order states that, within three business days of the closing of the sale, Escom will pay $6,312,593.14 to creditor Washington Technology Associates and $3,772,545.77 to creditor Dom Partners. Minus the brokerage fee for Sedo, the court is holding back a couple million dollars it will need should the Nuthin’ But Net complaint be upheld.
The court retained the exclusive right to enforce the terms and provisions of the order and resolve any further disputes that may arise as those terms and conditions are being met.
The order can be read here.
