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Lender Seeks to Throw Out Sex.com Bankruptcy Petition

Lender Seeks to Throw Out Sex.com Bankruptcy Petition
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Mar 31, 2010 9:45 AM PDT    Text size: 

NEW YORK — A lender is asking a federal judge to throw out an involuntary bankruptcy case against Sex.com so it can resume a foreclosure auction.

According to court documents, DOM Partners LLC, a New Jersey lender, says it loaned more than $4 million to Escom LLC to fund the website’s operations.

DOM Partners said in court papers that Escom shouldn’t be in Chapter 11 bankruptcy. The company further claims that it would be best to hold a new auction so that it could recover the debt.

DOM partners claim that “nothing short of a miracle” would allow Escom to repay its creditors without a sale of the domain name. They add that if the case were to be immediately dismissed, enough interest could still be generated among potential bidders.

An earlier auction set for Mar. 18 was put on hold after three of Escom’s other creditors filed a petition to stop the auction. The creditors, according to the filing, have a combined claim of more than $10 million.

Mike Mann, an investor with all three creditors, said selling Sex.com at auction was not going to enhance its value and would have been undervalued.

Mann added that it was actually the lenders that had prevented the website from thriving.

"The other investors interfered and blocked us, threatened us and caused us various troubles and losses. We had our hands tied, and our money stolen," Mann said.

"These people were trying to fire sale it illegally after they did all these other things, so I couldn't allow that to happen."

Mann also said that a claim by the lenders in the court documents that Mann's group was actually managing Escom, was false.

Escom paid $14 million for the domain name in 2006, but the company was unable to repay the debt. The lender ordered the foreclosure sale, which was supposed to have an opening bid of $1 million.

Mann said he believes the site is worth about $50 million and that he had gotten involved with the website in hopes that the website would make $100 million so he could give 100 percent of the proceeds to charity.

A hearing is set for Apr. 20 at the U.S. Bankruptcy Court in Woodland Hills, Calif.

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