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Sex.com, drugs and a rocky road
Tracking down the millions owed after the theft of a tangled web domain.
December 8, 2005: 4:33 PM EST
By Matthew Boyle, FORTUNE writer

NEW YORK (FORTUNE) - The surreal saga of the adult Web portal sex.com -- a ten-year tale whose cast of characters includes a convicted felon, a private investigator with a Stanford MBA, a dot-com entrepreneur turned speed addict, a young woman caught with 202 pounds of marijuana, and the operator of a Mexican shrimp farm -- just added another improbable twist.

On December 5 in Santa Clara's Elmwood jail, a man named Stephen Cohen was deposed for nearly seven hours about the location of assets he acquired while he operated sex.com, a valuable piece of Web real estate that Cohen hijacked from Gary Kremen, its rightful owner and also the founder of Match.com. Kremen had registered sex.com in 1994, but Cohen stole the site a year later by defrauding the domain registrar. He was later sued by Kremen.

After a lengthy trial, Judge James Ware found in 2001 that Cohen had fraudulently acquired the site, and issued a $65 million ruling against him. Cohen, 57, whose colorful rap sheet includes a two-year stint in a federal pen for posing as a bankruptcy lawyer, then skedaddled south of the border. On Oct. 27, after four years on the lam, Mexican authorities arrested Cohen as he tried to renew his Mexican work visa and handed him over to U.S. marshals.

Kremen, 42, says he burned through half a dozen lawyers and nearly $5 million in legal fees in a torturous effort to regain the site, which reportedly made tens of millions for Cohen in the 1990s. It is the location of those millions that's in question today—Kremen's advisors maintain that Cohen has squirreled it away in ventures that include the Mexican shrimp farm, a Tijuana strip club called the Bolero, and a Napster-like file-sharing site operating out of the Gaza Strip, and in various offshore bank accounts and front companies with names like Sand Man and Ocean Fund.

Cohen's dogged refusal to turn over, or even account for, his profits -- the judgment, with interest, now stands at $82 million -- and his repeated failure to turn up in court resulted in Judge Ware's issuing a warrant for his arrest. (Cohen's lawyers maintain that heart problems and an unrelated criminal case in Mexico prevented him from returning to the U.S.) "This case is fascinating -- there's never a dull moment," says Margo Evashevski, a California private investigator (and Stanford MBA) who's currently in Mexico digging up info on the shrimp farm for Kremen.

The smooth-talking Cohen, who in 1999 made a bizarre bid to buy Caesars Palace in Las Vegas, was living in a Tijuana penthouse apartment near a golf course when authorities closed in. Jhuliana Aramis Cohen, the 21-year-old daughter of his ex-wife Rosa, was arrested in late June for trying to cross the U.S. border with 202 pounds of marijuana. She was sentenced in October to ten months in federal prison, and U.S. marshals notified Mexican authorities to keep their eyes peeled for Cohen. When he showed up to renew his work visa, they pounced.

Kremen now runs sex.com (Match.com has been sold twice, to Cendant and then to Barry Diller's IAC/InterActive Corp.), which makes about $1 million a year. He lives with his sister and his personal trainer in what was Cohen's residence -- a seven-bedroom, 9,800-square-foot Spanish-style mansion in tony Rancho Santa Fe, Calif. -- that the court awarded him. Kremen says the pressures of the case helped spur an addiction to speed, which he has since kicked. "I have had ten years of stress," he says. "I should get a tattoo of that on my butt." Yet he says he bears Cohen no ill will. "I used to. But I've learned so much -- about the law and about how to avoid people in business. These are invaluable lessons."

He's still waiting for his court-awarded money. A Nov. 21 hearing revealed nothing except Cohen's desire to represent himself as co-counsel, so he was deposed earlier this week, according to Tim Dillon, one of Kremen's attorneys. Limited progress was made. "He's very forthcoming about closed accounts, but not so much about current assets," Dillon says. There will likely be at least two more installments, depending on how forthright Cohen is with the details of his assets, he adds.

But Kremen seems ready to put the episode behind him: He reports that a Boston-based investment group is close to acquiring sex.com. Let's hope this buyer doesn't own a shrimp farm in Mexico.

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