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Archives - Thursday, May 27th, 1999

A big internet war pits three of internet porn’s biggest companies, www.sex.com, www.cybererotica.com and www.clublove.com (IEG).

Luke talked Tuesday night 5/25 with Stephen Michael Cohen, administrator of www.sex.com, based in Tijuana, Mexico. Owned by the international company Ocean Fund International, based out of the British Virgin Islands, www.sex.com claims almost nine million members, making it the biggest internet site. It dwarfs all other porn sites such as industry leader www.cybererotica.com and the highly publicized www.clublove.com which brought us nude pictures of Pamela and Tommy Lee, as well as Dr. Laura.

A convicted felon, Cohen was sentenced to 46 months in federal prison for bankruptcy fraud, false statements and obstruction of justice. He served three years at the U.S. Penitentiary at Lompoc, and was released Feb. 1, 1995, on three years' probation.

On July 15, 1998, Ocean Fund released this:

Ocean Fund International, a British Virgin Island International Corporation announces today the appointment of Stephen Michael Cohen at a record salary of 17,000,000.00 a year and $100,000,000 in stock options to run its' wholly owned subsidiaries SEX . COM and Sand Man Internacional in Tijuana, Mexico.

Sir William Douglas, Chairman of the Company, said, "Cohen was the founder of the French Connection BBS and SEX . COM in 1979 which were subsequently sold to Ocean Fund. Cohen left the company in May of 1998, in order to spend more time with his family.

" SEX . COM reported to Ocean Fund net income of $95.5 million for the fourth quarter ended June 30, 1998, an increase of 81.2% from that reported for the same period last year. The major increase was due to 1200% increase in advertising rates and a membership of 8.5 million users each paying $24.95 per month which is increasing monthly at 18%.

" SEX . COM is by far the largest web site on the internet which has resulted in major internet congestion problems at Mae-West and Mae-East. Consequently, it was forced to open its own internet NAP in Tijuana, Mexico with the help of WorldCom and UUNET.

"Our success in developing our marketplace which has resulted in our 40 to 61 million unique hits per day has been a product of Cohen's outstanding organization and execution."

Cybererotica and IEG (Seth Warshavsky) are funding a lawsuit by internet pioneer Gary Allen Kremen against Ocean Fund’s Sex.com over the domain name sex.com. Kremen claims that he owns it.

Like Cohen, Kremen has received write-ups in numerous newspapers. Here is a sample:

Newsday 3/5/95

"Electronic cash will let the Internet take over TV," David Chaum, managing director of DigiCash, told a reporter. "Quote me." Another gushing man crammed a card into Chaum's hand with the name of a San Francisco company that did not exist a year ago. It had to happen, he explained, because the whole world will need what he has to offer very, very soon. "Classified online - it's the future," said Gary Kremen, president of Match.com. "It makes sense. Doesn't it?"

Atlanta Journal and Constitution 12/6/98:

Kevin Sinclair, who lives in a Silicon Valley suburb, is the lucky owner of http://www.computer.com, presumably one of the most valuable domain names on the World Wide Web. And now he wants to sell it for at least $500,000. So far the highest bidder has offered $300,000.

His associate representing him, Gary Kremen, insists Sinclair is not a speculator but that he planned to start an online computer store when he acquired the name in 1994. He quickly realized he did not have a shot in such a competitive market, even with the right address. So he left the working world to stay home with his children.

Kremen may be just the right guy to help him make a deal: Kremen was involved in the negotiations between Digital Equipment Corp. and Jack Marshall, who until earlier this year owned the address www.altavista.com. Digital, which owns the AltaVista search engine, paid Marshall $3 million to give the name up, reportedly the largest amount ever paid for a domain name.

San Jose Mercury News 2/9/99:

And often they fear ruining their maverick reputation.

Such fear is keeping Gary Kremen, 35, from launching his fourth company, at least for now. "When you start a company, everyone knows it," he says. "It's made me a little bit gun-shy. It's a type of performance anxiety."

Among his ventures was the Web-based dating service Match.com, which was sold to Cendant Corp. for about $7 million in 1997. Currently, the San Francisco resident is advising several existing businesses, including one that puts advertising on golf driving ranges. What he calls his "risk profile" -- his tolerance for risk -- is "temporarily lower."

I talked to Stephen M. Cohen Tuesday night, 5/25/99.

"Gary Allen Kremen filed a lawsuit in the northern district of California against us and Network Solutions over the domain name sex.com," says Cohen. "Supposedly Ron Levi (Cybererotica) and Seth Warshavsky (IEG and Club Love) put up the money. We filed a motion to dismiss his lawsuit. Kremen was deposed by Network Solutions. US district court (San Jose) Judge Weir dismissed 98% of Kremen’s with prejudice, which means he cannot refile.

"Kremen’s attorneys (Sheri Falco and Katie Deemer) have not done anything they were supposed to… He made a demand for $20 million and the return of the domain name. We laughed at him and sent him a letter and told him, what has he been smoking.

"His deposition was the April 16, 17th of April. I’ve read the deposition. He was hypnotically glued to the camera. He wouldn’t look at anybody or talk to anybody. Based on his deposition, we’ve filed a motion to dismiss his complaint in its entirety. His attorneys went nuts when he admitted that he did not own sex.com. They ended up in a big screaming match.

"I’ve had the name sex.com since 1979, when I had the French Connection BBS (Bulletin Board Service). Sex.com originally meant Sex Communications. Sex.com was used in the chat system we had for swingers and nudists. Back in 1979 we had 7-8,000 members. We had it long before the internet was invented. I sold the domain name to Ocean Front. And we’ve used it continuously.

"With trademarks, you have to litigate to protect the trademark or you can lose it. We’ve taken away marks from several people. When Kremen filed this lawsuit, he did us a big favor. Because if you don’t sue someone within a period of time, it can be construed as giving implied permission. We decided at that point, instead of fighting 40 lawsuits [against people using the name sex.com], to take care of Kremen.

"We’ve also filed a lawsuit against Ron Levi at Cybererotica. He’d taken the name www.sex.com. We initially filed a racketeering lawsuit against him. He agreed to take down the name. He subsequently put up the name again and we filed another lawsuit. Now we’re going for full damages and we’re going to take over Cybererotica.

"We’ve got Seth Warshavsky’s tit in the wringer. He came out with some ludicrous statement that he is making $50 million. He hired a publicist that puts him in all these newspapers. He’s admitted that he’s engaged in internet gambling, which is illegal in the US. There’s a company that went public and published his ridiculous statements to his stockholders. We’ve found people who invested in that company and are now filing a lawsuit against Wired magazine. Wired will be held responsible because they did not verify the information. This will probably cause the demise of the publicly held corporation. Seth is the least culpable of the three but we hope that through discovery we will get his real income tax returns. We’re in contact with three government agencies and we’re working with them to have this man prosecuted."

Luke: "Isn’t he and IEG going public?"

Cohen: "He’s going to be lucky if he’s not in prison. We’ve got him cold. He’s f---ed. His statements that he makes $50 million a year were used in a prospectus for a publicly held company. Stockholders invested in the corporation based on those statements. This man is lucky if he makes a million dollars a year. By the time the US government gets through with crawling up his asshole, he’ll have serious problems.

"We have 8,799,232 members. The other adult internet sites are not even in the ballgame. Most people do not understand the internet. You get these fools like Seth Warshavsky who claims he’s doing all these millions of dollars worth of business. If writers were more technical, they could check out the information. One way is to go to www.arin.net who issues the autonomous system numbers. He doesn’t even have an autonomous system number, which means that he only has one ISP (Internet Service Provider).

"Go to www.arin.net, to whois, and write in "sexcom". Result comes back:

Ocean Fund International Ltd. (ASN-SEXCOM)

   Ave. Diego Rivera #2532, 6 Piso

   Zona Rio, Tijuana, B.C. 22320,

   MX

   Autonomous System Name: SEXCOM

   Autonomous System Number: 11083

   Coordinator:

   Cohen, Stephen Michael (SMC4-ARIN) steve@SEX.COM

   0115266343480 (FAX) 0115266 343480

Cohen: "Do you see the number 11083. That’s an autonomous system number. That means you report to more than one place, that means that more than one ISP feeds you. Type in IEGCOM and see what comes up. Nothing. Let me show you something, I can do something you can’t do. I can do a real trace. I will type in www.clublove.com. Hear that noise in the background. Club Love’s internet provider is cable and wireless. He’s running out of an IP address of 166.48.217.250. Club Love is registered as JNS Communications Inc and the address is 208.139.0.21. He only has one ISP. He’s probably running less than a T3 [internet line] and yet he claims he’s doing all this business. From what I can see, he’s not running more than a couple of T1s. His claims of millions of dollars are all BS.

"Now let’s take a look at Cybererotica. Cybererotica is fed by IGallery. Cybererotica is running greater than a T3. About 60-70 megs, probably two T3s. It looks like they have a big video stream coming through. Clublove is a dinky site. Cybererotica doesn’t even have an autonomous system number.

"Bandwidth is not indicative of how much money you make. You can make millions of dollars with a T1 if you’re running nothing but text. But once you start doing video and pictures, it eats up more bandwidth. For every dollar made, how much is kept. Cybererotica does lots of webhosting and buying of other people’s traffic. He has a great gross but a s---ty net. While sex.com has a tremendous gross and a 98% net. I don’t need to buy traffic. That is what separates the men from the boys.

"Ron Levi has stolen traffic from us [through using the name sexcom]. We’re going after him, for full accounting records since he has been in business and we’re going after a portion of his income. If he wants to f--- around, we’re going to play with him. In addition to an injunction, we’re going for damages. We’re going to take over Cybererotica.

"Let me tell you something. If I had to go against Ocean Fund International, I’d bend over and kiss my ass goodbye. You’re talking about a billion dollar company who pays their attorneys more money per year than 40% of the webmasters put together.

"One of the reasons we filed our action against Cybererotica is that we became aware that the FTC and the criminal enforcement division of the IRS are looking seriously at Cybererotica and we want to go in there fast enough so that we can get something out of it. We have made IGallery aware that Cybererotica has serious problems.

"When Ron found out that someone was using his name [Cybererotica], he went berserk. It would be outrageous for him to assume that Ocean Fund will allow him to do to Ocean Fund what he didn’t want done to him. He’s got some serious problems. He picked a fight. It reminds me of the old Japanese admiral. They told him about Pearl Harbor and said they were successful. And he replied, "All you’ve done is step on the toe of a f---ing giant. And he’s going to f---ing crush you." And Ron has stepped on the toe of Ocean Fund.

"My function is not advertising or memberships. My function is strictly administration of programmers and staff. I haven’t handled advertisers on sex.com for three years. Other people handle that stuff. So this dispute with Cybererotica is not personal. Ron knows how to find me. He’s been to our offices."

Luke: "I hear that you have an extensive criminal record?"

Cohen: "That allegation has been made. And assuming that I was a mass murderer, what would be the relevance anyways. The relevance is only one issue – trademark rights. Either you have or you don’t. Even Al Capone could have trademark rights."

On the www.condomchronicles.com posting board 5/26, Vegas Lee wrote: "You can not believe anything dealing with Steve and sex.com anyway... two years ago he screwed more webmasters then anyone on the net and makes him money off suing the world... just the type of people we need in the business.

"I only have one real question about Steve Cohen.. if he really makes all this money.. then why did he screw so many webmasters two years ago when he was running live shows out of mexico and never paid us? I even talked to him on the phone and all he had to say was, call my Sec. she will send you a check.. called her and she had no idea what we where talking about.... hell, I have ***sex***.com names, have had for years, he threatened me three years ago at the migrage in Vegas... still no suit.. I would love to have his off shore company come to vegas for a fight.. would be fun.. he is not liked in this town either.."

Earlier in the day, Mr. Small wrote: "Last Friday, I went to visit the new offices at SEX.COM and to meet James Powell, and I wanted to see this infamous COHEN, everyone always talks about. The offices are about 25, 000 square feet in a new building in the Tijuana area of Mexico. There computer room look quite full, what and who owns what I am not sure about. I would think some of the equipment belongs to their clients.

I never got to meet Cohen; I was told by several employees that he was in Vegas. Powell reminds me of my grandfather. Nice guy with who is seems to be level headed.

I also met Miguel Betincourt, who I was able to spend some time with. From him I learned that their company had filed an action against CYBEREROTIC and FM. I asked to see the law suit and I read it, it is true that there is a hearing scheduled for June 2, 1999 in the U.S. District Court in Orgeon. From what I learned, they are trying to get the court to stop FM from using www.sex.com and they are going after CYBEREROTICA as damages. From what their attorneys have told them, there is a good shot that they may end up with CE. I also read that.

I asked Miguel about the KREMEN action and who really ownes SEX.COM! Miguel let me read the KREMEN'S deposition that was taken on April 16 and 17. This guy is the one big dummy! When the attorney for network solutions asked him what other names he was know as, he answered IDIOT, DUMMY and FOOL. He also tesitified that he was not the owner of SEX.COM. The deposition was taken before a court reporter and it was videotaped at the request of Network Solutions. I saw a motion to dismiss that case that is scheduled for June by SEX.COM and Network Solutions.

They seem to know about Forbes article and Miguel comments were good news, bad news brings more people to our site. I asked about Joe Dickers injunction against them and it seems that so such action was ever filed.

I also saw something that made me sick, it was two letters, one was from the CRIMINAL INVESTIGATION UNIT of the IRS regarding CE and IEG. Looks like they have some problems. I never knew the government pays for turning someone in. Seems that Seth told some media people that he made in 50 million dollars in 1997 and that he is into gambling on the internet. The government knows that he paid very little taxes.

The other letter was from a federal agency that investigates credit fraud by merchants. It seems that these people got this agency and the U.S. Attorneys office involved. I didn't want to look at the other lawsuits they were in the process doing, because I felt so sick after seeing what I saw, that I just made an excuse and left Tijuana.

I am into this business because I enjoy it. These people are into a very heavy revenge trip that goes well beyond scary and it seems to me they do not care about the harm to our industry that they will cause. I now know why VISA and MC are getting on our backs and I think it is going to get a lot worse. Someone needs to sit down with these people and talk some sense into them. I was not going to say anything, but I felt I had to!

Globiz: "Cohen glosses over his criminal record in this supposed "interview" as being unimportant. Considering that I read his felonies involved forgery and running cons, I'm not so sure that's true. Personally, it sounds to me like a disinformation campaign is being waged. And on the face of it, it sounds like a real reach to say that sex.com was used as a trademark for "Sex Communications". I mean, is this the FIRST thing YOU would think of when coming up with a trademark for a name like that before anyone had ever heard of using .com domains?"

James Powell, VP of Ocean Front International replies to a Cybererotica employee defending her boss Fantasyman aka Ron Levi: "I go out of my way to protect my employees until it is proven that they are wrong. I read a lot of things about Cohen and 98% of it is just crap. I never make comments on my own, however, I do respond to comments made by others when they are clearly wrong!

You made the comment that "This is again just another example of Mr. Cohen's desire to stir hate and discontent..."

The facts…Cohen didn’t order the law suit against your boss, I did and the buck stops with me.

The whole world knows that your boss and the other fellow put up the money for Kremen and personally, I do not have a problem with that. That is their right! They can spend their money any way they wish.

Why did I go after your Boss? Because he was served with 3 different law suits and each time agreed to stop using wwwsex.com. Your boss has attorneys and he knew what he was doing and thinks this is a joke. Well, believe me when I say it is not! I refuse to argue the merits of this case and or any other case that is before the courts in this forum. That is why we have judges and attorneys.

Regarding this so called Mr. Small, whoever the hell he is, I just love these crazy names! If you read his comments, they were not favorable to SEX.COM by any stretch of the imagination. Furthermore, if you look at his IP address it goes to a site in the State of Louisiana. We are located in Tijuana, Mexico, which is a far cry from that state. Again, it would not be fair for me to comment about a unknown person who makes comments about us.

As far as the other fellow who made comments about our trademark rights relating to SEX.COM after going to the library. I guess if we buy your logic, if you go to a book store and read one book about "how to do a heart surgery" then that in itself makes you a doctor. That logic smells like bad fish! Please seek the advise of a license attorney that deals with trademark laws and litigation!

You may not like our company, its employees, Cohen or me, but you might as well face the fact that we are here to stay and do whatever it takes within the law to protect our rights!

Here are excerpts of articles about Stephen Michael Cohen and his frequent brushes with the law:

12/17/1990
The Orange County Register

Residents of million-dollar-plus homes in the exclusive Brier Lane area of Cowan Heights weren't thrilled at the goings-on after a new resident moved into their quiet neighborhood.

They watched for weeks as scores of cars parked every Friday and Saturday night on the dead-end street. Couples poured out of those cars and quickly entered the nondescript, one-story home at 9881 Brier Lane.

Eventually word leaked out: The new neighbor -- identified in court documents as Stephen Michael Cohen -- was operating a sex club in the house.

Cohen made no effort to keep his activities secret. Sheriff's investigators say Cohen told them that the 2,600-square-foot, four-bedroom house is the location for The Club, a place where couples swap partners for sex.

"We don't believe that kind of operation is appropriate in a residential community," said one neighbor, Alvin J. Glasky. "It's probably not appropriate in any community, but certainly not in a residential community."

When The Club opened in 1988, windows were blacked out and fences were raised to prevent anyone from looking in, according to court records. The garage was converted into a wet bar and the dining room was transformed into a dance floor, complete with revolving, disco-style lights.

Pornographic films were shown on a wide-screen television in the living room and in the bedrooms were padded bunk beds and tunnels and crawl spaces for more intimate contact, the court file shows.

07/18/1991
The Orange County Register

The operator of a sex club in Tustin won't be retried on charges of running an adult business in a residential area, an Orange County prosecutor announced Wednesday.

Stephen Michael Cohen , 44, of Trabuco Canyon had been charged with violating a county zoning ordinance for running The Club, a "swing" party house on Brier Lane where members swapped sexual partners.

After a three-day trial this month, jurors voted 8-4 to find Cohen not guilty of the misdemeanor charges. Deputy District Attorney Stephanie George said her office decided it lacks the evidence to win a conviction in a new trial.

The Club moved out of the house on Brier Lane several months ago to a nearby undisclosed location.

"Everybody wants to put the emphasis on sex and on swinging," Cohen said after the charges were dropped. "(But) it's my position that as long as there are no laws being broken and it's lawful conduct, the police and the state should be stopped from interfering."

"As long as (The Club) is not a business and it's a lifestyle ... this is lawful conduct."

06/18/1996
The Orange County Register

The concept: Create a sexual wonderland, where no fantasy goes unfulfilled.

It would cater to the manly man with car racing, golf courses and skeet shooting _ but the main draw would be 500 exotic women who "live to serve your every desire."

"Select as many companions as can be indulged in a weekend," says a sample brochure for the time-share brothel. "There is no request that can be denied you at Wanaleiya."

Last December, four Orange County entrepreneurs formed a new company in Nevada called Sporting Houses Management Corp. to build The Wanaleiya Resort. They're in the midst of a $1 million public stock offering, partly dedicated to purchasing one of the best little whorehouses in Nevada _ Sheri's Ranch _ as the resort's anchor.

The man [Stephen Michael Cohen] who was Sporting Houses' registered agent in Nevada has a criminal record for fraud and representing himself as an attorney when he is not, according to court records. He no longer works for the company.

The company has its own site on the World Wide Web: "Purchase stock in a REAL WHOREHOUSE!" it says, beside photos of naked women. Beneath the flashing "You will have sex soon!" is the company's prospectus.

Wanaleiya's mock-up brochure wastes no time on formalities. Its cover photo: a narrow slice of a dripping wet, bikini-clad torso.

"You may choose a special companion or browse the Resort in search of the lady that you'd like to accompany you to dinner on your first night," it says. "The 500 companions are friendly and experienced _ they will not hesitate to see to your comfort with pleasure and spare no time in making you feel at home."

But the owner of the brothel canceled Sporting Houses' option to buy the place weeks ago.

"They were supposed to come up with the money. They never did," said James Miltenberger, floating on his yacht off San Diego. "So we canceled their option. We told them unequivocally `no.' Sheri's Ranch is not for sale to them at any price. I want nothing to do with them."

It didn't start out so acrimoniously.

"It originally sounded pretty good," Miltenberger said. "They said, `We want to buy.' I'm going to listen."

Miltenberger dealt with Stephen Cohen, a big man with a confident air who represented Sporting Houses. The company paid $25,000 for an option on the brothel _ and Miltenberger says he waited and waited for Cohen to come through with further payments.

"I'd say, `Cohen, where's the money?' and he'd say, next week, he was going on vacation. I'd say, `Cohen, where's the money?' and he'd say he was sick and going in the hospital," Miltenberger said.

The brothel owner said he thought it an odd breach of protocol when Cohen _ trying to tie up a $7 million deal _ didn't pick up the tab for dinner and drinks.

"The longer they talk, the more you realize ... ," Miltenberger said. "So I canceled them out."

Cohen was Sporting Houses' spokesman from December until the first week of June, when, Powell said, Cohen stopped working for the company.

"Mr. Cohen was our administrator _ he worked in the capacity of a high-priced secretary," Powell said. "That's why he's not with us anymore _ he was looking for more money than we were able in good conscience to pay. His background had nothing to do with his moving on."