The purported $10 million sale of the Fund.com domain name in 2008 has been exposed as a fraudulent transaction, according to a recent ruling by the Court of Chancery in Delaware.
Court documents reveal that the reported sale price was part of a stock pump-and-dump scheme. The transaction was fabricated through fraudulent means to artificially inflate the company’s stock value.
Following the phony sale, domain broker Igloo listed the domain for sale, and Media Options eventually sold it in 2018.
The company’s story took another twist when an investor later claimed a substantial tax loss based on the fabricated sale.
Investor Braziel employed a tax avoidance strategy hinging on the company declaring an $8.725 million net operating loss (NOL) from the domain’s sale. To justify the NOL, Braziel used the fictitious $10 million purchase price, added a commission, and subtracted the actual sale price of $1.5 million, resulting in the $8.725 million NOL.
Despite knowing from his investigation that the $10 million figure was fabricated by Galanis for the pump-and-dump scheme and significantly higher than the domain’s true value in subsequent transactions, Braziel proceeded to use the inflated figure for tax purposes.
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