Twenty employees have quit. Dozens of customers have left. The two floors of office space on East Bay Street are in foreclosure, and vendors are owed $2.5 million. But, for now, the lights are still on at Micfo, a few months after an indictment.
Micfo and the CEO of the 20-year-old cloud-hosting company, Amir Golestan, were formally charged May 15 on federal wire-fraud charges. Golestan has pleaded not guilty.
Expected to go to trial in November, Golestan faces allegations he set up a deceptive network of roughly a dozen shell companies to obtain internet protocol addresses from the North American nonprofit tasked with managing them.
Those IPs are critical to Micfo’s business model. In order to provide customers with the hosting services it offers, the tech company must assign its clients these 32-digit strings, which act as an identifier for every device that connects to the internet. IPs like this are a dwindling resource. Companies must request them from one of five regional registries. The value of a single IP hovers between $15 and $25.
One of these regional organizations, the American Registry for Internet Numbers, believes Micfo obtained 735,000 addresses fraudulently.
Golestan and Micfo settled with ARIN in May and was ordered to pay $350,000 for ARIN’s legal fees, $275,000 of which has been paid.
Micfo was allowed to keep many of its valuable IPs so that it could stay in business. But with just two employees left and a trial in Charleston approaching, Micfo’s future looks uncertain.
“The IPs are needed in order for me to be able to even operate,” Golestan said during a hearing in his divorce case Wednesday. He is allowed to keep 300,000 IPs if he pays the rest of the settlement with ARIN.
Running the business now is “every day an uphill battle,” he said.
When the indictment came, 60 customers left, Golestan said, costing the company about $1.7 million in revenue.
It is difficult to say how the private company is doing exactly, and Golestan’s legal team has objected to providing those records in his divorce case. His lawyer, Jim McLaren, commented the company was “on its back.”
As recently as July 2018, Micfo was presenting an image of success and growth. The company said in a press release it was hosting servers in 55 locations around the world, calling itself “one of the largest networks of globally-dispersed cloud platforms.”
Golestan said in family court Wednesday running the business has been an uphill battle for survival since the spring. JP Morgan said in late May the bank intended to close his personal and business accounts. He faced hours of questions Wednesday about his and Micfo’s finances as a judge weighed whether he was willfully avoiding paying thousands in his wife’s past-due attorney’s fees.
Golestan appeared eager to defend himself and the business, at times speaking to Judge Gordon Jenkinson directly. At one point during the all-day hearing, McLaren told his client to “stop talking.”
Jenkinson decided to hold him in civil contempt of court, enforcing a $300,000 tab on his bills to be paid within two months. He faces 60 days in the Charleston County Detention Center if he does not pay. Kristin Golestan’s legal team was able to show the CEO had the ability to pay the fees. At one point, they pointed out Golestan spent about $6,000 on a chicken coop at the couple’s country home in Meggett, installed just a week before he lost his case with ARIN.
Golestan said, when asked, that three lawsuits have been filed against him by his vendors. He owes firms that run the data centers where Micfo hosts its servers, licensing companies and software providers.
Bills due to his contractors total $2.5 million. He’s months behind on payments at his three properties. The Micfo office is in foreclosure. He indicated that placating companies hunting down bills has begun to consume his work life.
Meantime, American Express National Bank filed a debt collection case against him on Thursday, chasing $13,936.
Reach Mary Katherine Wildeman at 843-937-5594. Follow her on Twitter @mkwildeman.