Over 74,000 .eu domains have been suspended and 400 registering companies sued by the company in charge of the European Union's top-level domain.
Non-profit organisation EURid has taken legal action after a review of the system for .eu domains (which went live in April) revealed a small number of companies had registered several hundred phantom companies in order to manipulate the system.
A EURid spokesman told The Register that every one of the 400 registrars had been sued for breaching its contract with the company because they were "warehousing" domains - storing them in order to sell them on.
All the 74,000 domains registered by the 400 registrars were now in the hands of just three companies - Ovidio Ltd, Fausto Ltd and Gabino Ltd, he explained. "We are convinced the registrars are just a front, and can be looked on as one and the same."
The company is waiting for court proceedings to begin in Brussels in October. EURid then hopes to make all the domains in question, which are currently "on hold", available again as soon as possible, although it is unlikely to be a position to do so until at least the end of the year.
EURid stressed, however, that this legal action was only the start of its review and it will continue to investigate other complaints about phoney registrars. It has already suspended an unspecified number of other domains because the owner was unable to prove they lived within the EU.
Since EURid's computer system worked by creating a virtual queue of accredited companies who then took it in turns to try to register a particular .eu domain, the €10,000 registration fee for each company made it worthwhile for a few large US companies to flood the system with front companies and then profit from selling valuable .eu domains later.
The result was that a large number of domains were taken by companies unknown in the registrar industry, causing an immediate outcry from more established companies.
Despite the controversy, the .eu top-level domain has been an unexpected success with EURid announcing earlier this month that it has sold its two millionth .eu domain in just three months. ®