Creditors of the owner of the Sex.com website have filed an involuntary bankruptcy petition against the company, stalling a lender foreclosure auction for the valuable website that was scheduled to begin on Thursday.
Three creditors of Escom LLC, which reportedly paid $14 million for the website's domain name in 2006, filed the bankruptcy petition in U.S. bankruptcy court in California on Wednesday, claiming they are owed more than $10 million.
The creditors said they were seeking to push the company into bankruptcy rather than allow the lender, DOM Partners LLC, to conduct an auction in New York on Thursday after the company had been in default for a year.
The creditors, Washington Technology Associates, iEntertainment Inc, and AccountingMatters.com, said they believed the auction would have diminished the value of Escom's assets, in a statement released by their attorney on Thursday.
The auctioneer hired by the lenders, who planned to require potential bidders to have a $1 million certified check, had said previously there was considerable interest in the website's auction.
Under U.S. law, a company typically has 20 days to respond to an involuntary bankruptcy petition. When a bankruptcy petition is filed, it temporarily prevents lenders from seizing assets, so the auction was halted.
Escom had acquired the domain name from Gary Kremen, founder of the dating website Match.com, who had registered the Sex.com domain name in 1994.
Escom has not responded to requests for a comment.
The case is In re: Escom LLC, U.S. Bankruptcy Court, Central District of California, No. 10-13001.
(Reporting by Emily Chasan; Editing by Richard Chang)