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An auction for fetched upwards of $851,000 this month, with the valuable Ethereum domain name being offered up to the highest bidder after its former registrant Virgil Griffith – the former Ethereum Foundation scientist who is currently in the midst of a 63-month federal prison sentence for helping North Koreans to dodge sanctions by way of crypto – failed to renew the domain. Not your average domain name tale. The story gets even more elaborate, as the domain is now at the center of a newly-filed lawsuit, with Griffith and True Names, Ltd. d/b/a Ethereum Name Service (“ENS”) filing a lawsuit against GoDaddy for allegedly failing to abide by its agreement to “respect, acknowledge, and protect the duly registered and extremely valuable domain name” by selling off the domain to Dynadot LLC, which put it up for auction. 

According to the complaint, which was filed with the U.S. District for the District of Arizona on Monday, Griffith and ENS, the latter of which is behind the Ethereum based .eth naming system, assert that earlier this month, GoDaddy “unilaterally and willfully announced to owners that the domain’s registration with GoDaddy had expired” – despite being registered with GoDaddy until July 26, 2023 – and that absent any action by Griffith, the domain would revert to the registry and be available to others to bid on beginning on September 5. 

“While taking this step was wrong,” the plaintiffs claim that GoDaddy made matters worse by failing to “abide by its own notice” when it did not wait until September 5 and sold the domain name to Dynadot on September 3 “without notice” to Griffith or ENS. In doing so, the plaintiffs allege that GoDaddy has not only “deprived [ENS] of its livelihood,” but the sale of the domain “will disable a valuable cryptocurrency network and recklessly risk making it available to scores of malicious actors.” The issue, according to the plaintiffs, largely centers on the fact that the service “acts as a gateway between the traditional [domain name system] namespace,” which enables users to connect to websites using domain names instead of IP addresses, and the ENS system, which essentially does the same thing – albeit for crypto addresses (think: thefashionlaw.eth). 

Thanks to the ENS system, users can go further and “host content on [ENS domains] that is accessible to anyone with a web browser by simply appending .link to their name,” Griffith and ENS assert, pointing to as one example of the of an domain, which facilitate “hundreds of thousands of cryptocurrency transactions by thousands of users.”  

Against this background, Griffith and ENS claims that GoDaddy “took actions contrary to the honest practice in industrial or commercial matters when they refused to allow the domain to automatically renew and also when they refused to engage in good faith communications with [them] when [they] attempted to manually renew” the domain on August 3. This alleged bad act was compounded, per the plaintiffs, by GoDaddy permitting Dynadot to “put up the domain, creating the false representation that they had the right to sell the domain … despite not having that right.” 

In addition to GoDaddy and Dynadot’s allegedly “unfair competitive practices,” which have “frustrated the plaintiffs’ attempts to participate in the commercial market, [and that] have caused the plaintiffs substantial reputational damage, have deprived [them] of their property, and have caused substantial damage,” Griffith and ENS also claim that the buyer of the domain, Manifold Finance, Inc., has also run afoul of the law. Manifold Finance, which is named as a defendant, “took actions contrary to the honest practice in industrial or commercial matters when it purchased the domain from the Dynadot auction on September 3,” the plaintiffs contend, “despite the fact that GoDaddy had posted a notice that the domain would not be returned to the registry until September 5.” 

Manifold “took further actions contrary to the honest practice in industrial or commercial matters when it publicized on September 3, that it was the new owner of the domain, despite the fact that GoDaddy had posted a notice that the domain would not be returned to the registry until September 5.” 

With the foregoing in mind, Griffith and ENS set out claims of breach of contract and Breach of the Covenant of Good Faith and Fair Dealing against GoDaddy, and claims of Intentional Interference with Prospective Economic Advantage, and Unfair Competition against all of the defendants. They are seeking damages of greater than $75,000 (a placeholder sum), but probably more importantly, since the transfer of ownership of the domain name to Manifold not yet taken place, Griffith and ENS are looking to get the court to award it injunctive relief that would serve to block the defendants from transferring ownership of the domain and also from preventing them from renewing their registration of the domain, among other things. 

The lawsuit comes amid a surge in demand for ENS domains, which surpassed the Bored Ape Yacht Club collection as the most traded asset on NFT marketplace OpenSea over the past week, “seemingly ahead of the Ethereum Merge,” CoinTelegraph reported on September 6. The recent spike in ENS trading volume has seen the average price of ENS items increase by 167 percent to 0.3895 ETH, or $641 (as of September 6), the publication stated, noting that daily volume for these domains – which have found fans in fashion and luxury – has risen from 120.7 ETH to 1044.6 ETH.

The case is True Names, Ltd., et al. v. GoDaddy, Inc., et al., 2:22-cv-01494 (D.Ariz.)