Oversee.net was once a high-flying darling of the domain name industry. It was rolling in dough–over $200 million a year in revenue at one point. It threw lavish parties for its clients, taking them to the Playboy Mansion in Los Angeles and to shoot AK-47s in Prague.
Oversee.net co-founder Frederick Hsu, through the Frederick Hsu Living Trust, sued Oak Hill Capital Partners and many former board members and executives earlier this year, alleging (pdf) that they undertook a campaign to sell off the company’s productive assets to “tunnel” money to investor Oak Hill.
Frederick Hsu co-founded Oversee.net with Lawrence Ng in 2000. The company amassed a large portfolio of domain names and its DomainSponsor domain parking service became an industry leader.
Like many outside investors do, Oak Hill wanted protection when it committed $150 million to Oversee.net. It demanded redemption rights that would allow it to redeem its preferred stock for $150 million in cash starting in February 2013 if Oversee.net had “legally available funds” to do so.
The lawsuit alleges that former Oversee.net CEO Jeff Kupietzky had an incentive to set the divestitures in motion because he received a $632,813 bonus after the first redemption. (It’s worth noting that Kupietzky left Oversee.net in August 2011, before the divestitures and redemption. It appears from the lawsuit that he received the bonus after leaving the company.)
Read MoreAfter all, Oak Hill is still in the hole for $65 million, not including its $24 million investment for Ng’s shares. If the company is able to recover more money, it would go to Oak Hill, not the common shareholders...
