To dig out from financial mess — Epik continues
But creditors aren’t happy with the pace as they are still owed money.
Domain name registrar Epik continues to dig itself out of a financial hole, but fresh problems continue to pop up.
The registrar offers a type of store credit called Masterbucks along with an in-house escrow service. Epik was using money from both of these to fund its operations rather than keeping the funds in separate bank accounts. The firm also didn’t have an escrow license.
It wasn’t apparent that the money was being used to fund operations (or otherwise unavailable) until clients became spooked that they wouldn’t be able to get their money back. That created what amounted to a run on the bank — and Epik didn’t have the funds to pay back all of its clients.
Epik brought in fresh management in September that is chipping away at these debts, but it doesn’t have the cash on hand to fund operations and make everyone whole today. It’s in triage mode, taking any fresh profits that come in and paying them out as available.
Recently, the firm sent an email to some clients stating:
When fresh management took over Masterbucks, the balance was approximately 4.5 million dollars. Through our dedicated and expeditious efforts, the fresh management team has brought that number down to just over $800k and change.
But the prior week, a representative of domain seller DomainEmpire posted a review on TrustPilot saying it has a balance of $1.5 million in Masterbucks that it has not been able to withdraw. It accrued this money from domain sales, it stated.
As stated by DomainEmpire, former Epik CEO Rob Monster offered it 6% annual interest if it kept its money in Masterbucks.
I asked fresh CEO Brian Royce yesterday via email regarding DomainEmpire’s $1.5 million debt. He stated the number was news to him. He also stated that the $800k quoted in the email was no longer correct even without the DomainEmpire number, since he just became aware of another debt of over $300,000 that wasn’t in Masterbucks, bringing the total (without DomainEmpire) to $1.1 million.
It seems that there is no clear record-keeping for the fresh management, which adds to the challenge.
More details regarding the blowup at Epik this year are starting to trickle out. A former contract EVP of Operations for Epik sued the firm this year, saying he has not been paid. The case was settled. In a court filing (pdf), an attorney for Epik wrote:
While working for Epik, the Plaintiff began working with one of Epik’s chief clients–JJE. JJE offered and invested into a plan for ownership in Epik. Within a few months, still, JJE changed its position and asked Epik if JJE could divest from their investment in Epik. As an agreement and negotiations between Epik and JJE progressed, JJE broke off from their original offer to Epik and negotiated for a settlement.
Monster had previously stated the firm received a $32 million investment. That investment didn’t fully come to fruition.
Hear from Epik CEO Brian Royce in DNW Podcast #410, recorded in October.
