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Internet Domain Name Theft Conviction May Be First in U.S.

Internet Domain Name Theft Conviction May Be First in U.S.

By Mary Pat Gallagher

New Jersey Law Journal

December 14, 2010

In what prosecutors are calling the first U.S. conviction for theft of an Internet domain name, a Union Township, N.J., man pleaded guilty Monday to stealing a web address and selling it on eBay to an innocent buyer: former professional basketball player Mark Madsen.

Daniel Goncalves admitted to Superior Court Judge Stuart Peim that he stole the address, http://www.p2p.com, in 2006 by hacking into the account files on the website of GoDaddy, an authorized domain name registrar, and altering the registration information to transfer ownership of the domain to himself.

He pleaded guilty to unlawful taking, theft by deception and computer theft crimes — all second-degree offenses that each could have brought him 10 years in prison and a $150,000 fine. He will be sentenced in May, with the state recommending five years plus restitution.

Goncalves still faces civil liability for the theft in a suit by the site owners pending in federal court.

The stolen P2P address was short and easy to use, making it well-suited as a site for peer-to-peer file sharing: an increasingly popular form of online networking that allows easy transfer of files among multiple users. Napster was an example.

Goncalves’ listing of the site on eBay caught the eye of Madsen, then a professional basketball player for the Minnesota Timberwolves with a sideline of buying up potentially desirable domain names in the hope that he could turn around and sell them for a profit.

Unaware it was stolen, Madsen paid $111,211 for the site and still had it when the original owners sued him, along with Goncalves, in federal court in Newark on Nov. 16, 2007.

That suit was pending when, in May 2009, Goncalves was arrested by the State Police Cyber Crimes Unit based on an investigation that began the previous October when the site’s owner, P2P.com LLC, reported the domain theft. A state grand jury indicted him on Nov. 16, 2009, on seven counts. In addition to the three he pleaded to on Monday, he was charged with second-degree identity theft and three fourth-degree counts of falsifying records by sending phony e-mails to create the appearance he had bought the domain from P2P for $5,000.

Meanwhile, last July 9, Chief U.S. District Judge Garrett Brown Jr. in Trenton administratively terminated the civil suit, P2P.com LLC v. Goncalves, 07-cv-5449, pending the outcome of the criminal matter. George McCarter of McCarter & Higgins in Red Bank, who represents P2P.com, says he will quickly notify Brown that the criminal case is resolved and ask that the civil case be restored to the active docket.

The nine-count complaint, filed by P2P.com and Freedom United LC, both Florida companies, accuses Goncalves and his company, EliteHost LLC, of hijacking and selling three web addresses: the P2P.com site as well as drugoverdose.com and profreedom.com. It includes claims against Goncalves for racketeering, fraud and violation of the federal Computer Fraud and Abuse Act, and against both Goncalves and Madsen for tortious interference, conversion and trespass to chattels.

The plaintiffs claim that when they learned the P2P address had been swiped and demanded its immediate return, Goncalves responded that he had bought it from P2P while Madsen, through his lawyer, also claimed to be the rightful owner. Madsen denied knowing that he was buying stolen property and counterclaimed against the plaintiffs for malicious use of process and tortious interference. He also cross-claimed against Goncalves for breach of contract, fraud and indemnification.

Madsen was let out of the case in April after he settled with the plaintiffs, returning the domain name to them and assigning them his claims against Goncalves. Madsen will share in any recovery based on a graduated scale, says his lawyer, Keith Miller of Robinson, Wettre & Miller in Newark. Miller describes Madsen as “completely hoodwinked” by Goncalves and says the suit “became a major distraction” that he “didn’t want to be in the middle of.”

Madsen’s basketball career included three years with the Los Angeles Lakers, from 2000 to 2003, during which the team won two NBA championships, and four years as a college player at Stanford University. He served as an assistant coach for the Utah Flash and is now at Stanford University pursuing an MBA.

Deputy Attorney General Kenneth Sharpe was the prosecutor. Rachel Goemaat, a spokeswoman for the Division of Criminal Justice, says Goncalves’ is the country’s first known conviction for domain name theft but declines to comment on the plea or on why the civil case alleges three stolen sites when criminal charges were lodged as to only one.

Goncalves’ criminal defense attorney, John Young Jr. of Willis & Young in Jersey City, says Goncalves, 26, is a “nice kid” but “nice people sometimes do stupid things.” Noting that Goncalves had a web-hosting company, Young thinks taking the address “started off as a challenge in his mind to see if he could do it” but got out of control.

Goncalves’ civil lawyer, Michael D’Aquanni of Springfield’s Roth D’Aquanni, could not be reached for comment.


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