I think this is relevant, but not quite accurate. I spotted the same thing myself at the time and mentioned it in an e-mail to Heather Carle at Afilias in the context of a longer letter.
From e-mail to Heather Carle at Afilias, 28 August 2001 00:17:
"I'll give Hal a bit of good advice too. Tell him to stop his Domain Bank site offering Landrush pre-registrations at $5 a time for names that have already been taken at Sunrise, but which his site says are still available. Tell him, he's made his system reject Sunrise names bought through Domain Bank but all the other Sunrise registrations can still be "bought" through Domain Bank for the Landrush. (Try it yourself and you'll see what I mean.) I mean, for fuck's sake, Heather : this guy is just walking into trouble... it's fraud! But just as relevant, he's giving his critics (and I'd say I was one at the moment) ammunition! So tell Hal to sort that out and save himself some trouble. He just needs to treat people right. I'm sure he's a really nice guy in his personal life and the way he treats people, but in business... sheeeesh!"
Yes I can confirm that Hal Lubsen was selling pre-registrations for names that had already been reserved in the Sunrise, but his system did block Sunrise names which DomainBank itself had sold.