Embattled domain registrar RegisterFly will lose its accreditation if it can't fix serious operational problems in the next 15 days. ICANN has informed the New Jersey-based registrar that it is in breach of its operating agreement, threatening enforcement action (PDF) after months of complaints from RegisterFly customers. The registrar's operations have descended into chaos this week, with its web site paralyzed amid allegations that the former president and CEO misused company funds.

As the company's principals battle one another, thousands of domain names have been caught in the crossfire. RegisterFly says that at least 75,000 customer domains expired as a direct result of the company's financial and management problems. RegisterFly is also an SSL certificate authority, making its stability an issue for about 460 site owners who are currently securing sites with FlySSL certificates.

A lawsuit filed by RegisterFly's parent company, Unified Names, blames the meltdown on misuse of company funds by President and CEO Kevin Medina, who was fired by the company's board. The suit alleges that Medina spent company funds on liposuction surgery and escort services. "After his termination, Mr. Medina deleted email accounts, access to support tools, and access for our risk/billing department to issue refunds," RegisterFly's Glenn Stansbury said in a statement posted at RegisterFlies.com, a customer protest site. RegisterFly is also reported to have changed the root password of its web server to prevent sabotage.

Complicating the situation is the fact that RegisterFly is an ICANN-accredited registrar, but has registered the majority of its domains as a reseller for eNom, which is owned by Demand Media.

The problems date to February 2006, when ICANN registrar liaison Tim Cole informed eNom of allegations that RegisterFly had altered customers' WHOIS contact data, replacing it with "intentionally inaccurate data," and that this action could constitute a potential breach of eNom's own accreditation agreement. "At this time, ICANN confirmed with eNom that any registered names sponsored through eNom's accreditation - even if processed through RegisterFly as a reseller - are eNom's responsibility," the ICANN letter notes.

That will be good news to the hundreds of thousands of customers who bought those resold domains. The fate of the approximately 880,000 domains issued by RegisterFly under its own accreditation is less clear. New president and CEO John Naruszewicz, who co-founded the company with Medina, says he is trying to rebuild the company's customer service operation and get the web site working again. "I have personally pledged all of my personal assets to make all of this happen," Naruszewicz said in the company's statement. "I've mortgaged my home, leveraged all assets, and am in the stages of securing large letters of credit to bring this company forward properly." Late Thursday, some domain owners were reporting that they were able to successfully log in and manage their domains.

In addition to its domain name registration business, RegisterFly also began issuing SSL certificates in November at rock-bottom pricing of $9.99 for a one-year certficiate, with a $6.99 buy rate for resellers. FlySSL certificates continue to be supported by browsers, but the company's Certification Practice Statement - a document outlining the practices a certificate authority uses in issuing SSL certificates - now returns a 404. Even worse, RegisterFly's own SSL certificate expired on Feb. 16, so customers attempting to log in to their management panel receive a browser warning of a certificate problem, which hardly instills confidence in RegisterFly's stability as a certificate issuer.