NEW YORK (TheStreet) -- The founders of social networking site Bebo.com Inc. have won an auction of the company with a bid of more than 10 times what they offered to be the stalking horse. Still, the winning offer represents roughly one-tenth the price at which the debtor last changed hands in 2010.

Michael and Xochi Birch, the husband and wife founders and minority shareholders of Bebo, won a Monday auction of

Bebo.com

through vehicle

MXB Holdings Inc.

with a bid of just over $1 million, according to a source with knowledge of the case.

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Judge Ernest M. Robles of the U.S. Bankruptcy Court for the Central District of California in Los Angeles approved the sale just after the auction, the source said. No order had been signed as of midday Tuesday.

The sale is expected to close next week, the source said.

MXB was the stalking-horse bidder for the auction, which had two separate lots: business assets and legal claims. MXB's lead bid included $50,000 for each lot, for a total bid of $100,000.

Bebo's business assets include all property, accounts, patents, trademarks, copyrights and other assets, while legal claims include Bebo's rights in any claims against any of the defendants in a shareholder lawsuit.

The source said no rival bids were received for the legal claims, but two other entities bid on the business assets, leading MXB to increase its bid to slightly more than $1 million.

Under the bidding procedures, approved June 6, rival bids of at least $50,000 per lot were due June 27. During the auction, bids had to increase in increments of at least $10,000.

MXB would not have received a breakup fee or expense reimbursement if it had lost at auction.

Just after the auction,

Michael Birch

tweeted: "We just bought Bebo back for $1m. Can we actually re-invent it? Who knows, but it will be fun trying."

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Birch's other enterprises include Internet project incubator Monkey Inferno Inc. and The Battery, a private club in

San Francisco

.

Created in 2005, Bebo.com was purchased by

AOL Inc.

for $850 million in 2008, when it was the third-largest social networking site in the U.S., according to a May 14 declaration by receiver

Michael Ong

of

Burke Capital Corp.

AOL

sold the company to private equity firm

Criterion Capital Partners LLC

for about $10 million in June 2010. Court papers said the company's value dropped, in part, because AOL did not continue to invest in it so that it would remain competitive with

Facebook Inc.

Bebo filed for Chapter 11 protection on May 9.

According to court papers, the company lost more than $2 million over the past year and nine months because of falling revenue and has many outstanding liabilities. Revenue in 2012 fell to $1.22 million, from $2.28 million a year earlier.

A group of minority shareholders sued Criterion, majority owner

Adam Levin

, Bebo director Tristen Lazareff and Bebo on March 5, 2012, in the Superior Court of the

State of California

in San Francisco, alleging charges including breach of fiduciary duty, gross mismanagement, unjust enrichment, waste of corporate assets and abuse of control. The plaintiffs include Hecker Consultancy LLC, which owns 14.92% of Bebo; MXB, which owns 9.79%; and

SV Angel LLC

, which owns 1.96%.

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The suit faulted the defendants' alleged operation of Bebo for more than 20 months without a shareholder or board meeting; alleged use of operating funds to pay Bebo staff that also work at Criterion; and alleged charging of unfair management fees and rent.

The action sought relief including restitution, unspecified damages and appointment of a receiver.

Ong was appointed as receiver on March 5. (The status of the remainder of the litigation was unclear from court papers.) A day later, Bebo Web hosting adviser

Quality Technology Services

Santa Clara II LLC threatened to terminate all of Bebo's services if the company could not pay $118,518 by May 10. Bebo owed the company for data services.

In its official schedules filed May 23, Bebo reported assets of $27,085 and liabilities of $1.76 million.

Matthew A Lesnick and

William F. Govier

of

Lesnick Prince & Pappas LLP

are debtor counsel.

Michael St. James

of

St. James Law PC

represents MXB.

-- Written by Aviva Gat in New York