It’s no secret that people buy and sell domain names at auction to try and make a profit. Auction site SnapNames has shockingly admitted that one of its executives was caught illegally bidding on tens of thousands of auctions to increase the bidding war and drive up costs for other bidders. 5% of domain name auctions from 2005 – 2007 were affected, the company says. The bidding war can’t get much dirtier than that.

The employee – real name Nelson Brady - created an account under the name of Halvarez and was shill bidding on auctions to boost the auction price. If he won he would then arrange for a partial refund from the company. He has since been dismissed from the company.

SnapNames is saying they’ll reimburse the difference between what an auction should have closed at and what it actually closed at, plus interest for all those customers who were affected by auctions bid on by Halvarez.

The auction company assured the customers that they doing their best to make sure this kind of problems will not occur in future. They will enhance monitoring of bidding activity for suspect behaviour and they will have different domain name registration policies for their employees.

In SnapNames’ defence also, the company has had an ongoing policy that prohibited employees from participating in SnapNames auctions.

But here has been considerable debate about trusting domain auctioneers amongst the domains industry but this could be very damaging to SnapNames’ reputation.