Legal

When people talk about the shot heard round the world, they typically mean a gunshot. In this case, it was the fatal dose of heroin injected into Google executive Forrest Hayes. Hayes met his untimely death on a yacht, during a tryst with a prostitute named Alix Tichelman who allegedly administered the drug.

The not-so-unlikely pair (let’s face it, rich techie types and sex workers have always gone together well) met on SeekingArrangement.com, a popular Las Vegas-based site where sugar babies set up profiles to meet sugar daddies. It seems like Seeking Arrangement CEO Brandon Wade is always in the news for one thing or another, but this might be the first time he and his site have gotten so much national attention.

Wade said in an interview that after Tichelman’s arrest was announced on July 9, Seeking Arrangement’s site traffic doubled and its new member count jumped to 12,000 per day from an average of 2,000. He also said that the site should generate at least twice the $10 million in sales it brought in last year, proving once again that one man’s tragedy is another man’s meal ticket.

Eric Van Susteren of the Silicon Valley Business Journal spoke with Brandon Wade about how Hayes’ death and Tichelman’s arrest are changing the future of Seeking Arrangement – if at all.

Wade has always taken a cavalier approach to his work, and it seems this time is no exception. Is he worried that the case will affect his business negatively? “I don't think so,” he says. “It seems that bad news ends up being good news when it comes to traffic for our website. What I'm more concerned about is making sure we tighten up our policies and look at where people misuse the site and come up with new innovations about where this can happen.”

That being said, he maintains that Seeking Arrangement is one of the “strictest websites in terms of terms of use, website policy and kinds of tools — as well as staff members that we employ — to keep unwanted members out of the site.” And he’s adamant that it’s ultimately not his job, or anyone else’s, to police the activity of members of his site:

“You're talking about adults and they're going to do what they're going to do. If you're bored with your life and shoot heroin up your arm, it's really difficult for a website or any other venue where people meet to dictate what people can or cannot do.”

"Remorseful" isn't exactly the word that comes to mind here. I think it’s safe to say that, notorious death or no notorious death, it will be business as usual for Brandon Wade and Seeking Arrangement.

Dating apps and online dating sites have taken the place of many personalized matchmaking services. Thirty years ago, singles who wanted to meet people outside of their networks joined a matchmaking service or placed an ad in the paper, as their options were limited. Using a matchmaking service involved a basic process: the customer would look through video profiles on VHS tapes, screening potential dates to see whether or not they would want to meet in person – much like sifting through profiles on an online dating site. Now, matchmaking services have to offer a little extra personalization if they want to compete with a free dating app.

Matchmaking services don’t come cheap. Because they market themselves as personalized services, catering to specific client needs, they often charge thousands of dollars.

Matchmaking service eLove has gone through a couple of incarnations – first known as LoveAccess until it was acquired by International Dating Ventures and became eLove, but has always been a matchmaking service. Now, the company is finding itself in hot water with dozens of its clients. It has an F rating and 143 complaints listed against it with the Better Business Bureau, mostly due to promises it makes about “referrals” that don’t actually happen.

According to The Courant, One 70-year old female client was promised 33 referrals (or dates) plus a VIP service for the hefty price of $7,000. A year later, she’d only received a handful of referrals, most at the beginning of her membership. A total of six referrals were made to her, costing her over $1,000 per referral. One of the men she met wasn’t even a member of eLove.

Another female client paid $6,000 and received only one referral, which was a phone call – not even an in-person date. And a third female client, a licensed psychologist who was 75 years old at the time she joined eLove, paid $9,566 last year for 16 introductions. After meeting only three men, including one she says who arrived drunk, she requested a refund. When eLove refused, she sought the refund, damages and punitive damages for breach of contract.

Instead of going to court, eLove agreed to settle with one unhappy customer so far. The other cases are still pending.

Should you join a personalized matchmaking service? With all the technology available at your fingertips, many daters don’t think it’s worth it. But for those who lead busy lives and just don’t find the time to meet potential dates, or for those who are nervous about getting back into dating and want a little hand-holding, it’s a valuable resource.

As with any service you decide to use, make sure you check it out first. Know how they are rated, how many complaints are filed against them, and what types of complaints. If the price seems a little high, or there is no obligation on their part in the fine print, you need to consider another service.

Tinder has hit a bit of a rough patch lately. The company behind the hyper-popular mobile dating app was recently slapped with a lawsuit by its former VP of Marketing, Whitney Wolfe. In the suit, Wolfe alleges that she was sexually harassed and discriminated against at work, stripped of her co-founder title, and forced out of the company when she complained.

There’s no question that Wolfe’s accusations have affected the people involved, one of whom was suspended indefinitely, but what remains to be seen is whether they affect the company as a whole and its majority shareholder IAC.

Investors have been hoping that IAC, which also owns Match.com and OkCupid, would use Tinder’s success to spin off its online dating businesses into a separate company, thereby making IAC shares more valuable. But now that Tinder’s in trouble, that prospect could be in trouble too. “Given what’s going on at Tinder, I would assume that probably would cause IAC and Match to think a little bit longer and harder about pursuing that at this juncture,” Scott Kessler, an analyst with S&P Capital IQ, told Bloomberg News last week.

I’m just guessing here, but IAC and its shareholders probably aren’t too pleased at this complication throwing a wrench in a very lucrative opportunity. Investors have been encouraging IAC execs for months to speed up the process of making Match its own business, but now their plans may be thwarted (or at least slowed down).

Last year, IAC made $788 million in revenue from membership and subscription dues for dating services – well more than twice what it had made five years earlier, despite the fact that they have yet to monetize Tinder. What's more important than revenue for investors is market value, which Tinder has in spades. Tinder is one of the hottest commodities on the market right now, and creating the separate Match group could cause spikes in the stock prices of both IAC and the newly formed company.

History has shown that this is a good move for IAC. When the company separated Match from its search business, its stock price jumped significantly. Barry Diller, IAC’s chairman, has also seen huge profits from spinning off businesses from IAC. The question now is whether or not Tinder is damaged goods and, if so, just how damaged. So far the company is remaining frustratingly tight-lipped about both Tinder’s trouble and the possibility of Match becoming its own company.

IAC is positioning itself to be the center of the online dating world. Its 150 brands are cornering the market, particularly Match.com, OkCupid, and popular dating app Tinder. Now, it’s added How About We to its roster. Neither IAC or How About We disclosed the purchase price.

How About We offers a unique twist in online dating – focusing on the offline part of the process. Members can create date ideas, post them to How About We, and see if anyone cares to join them on the date. This bypasses the typical process of scrolling through profiles and matches as you would do on other sites.

The company has gone through a lot of changes in the last couple of years, starting with broadening its reach to include curated dating services for couples (extending their user base and approach beyond just the singles market). More recently, the company purchased popular online dating site Nerve.com, and added three new content websites to the mix to offer editorial on dating advice, celebrities, sex, relationships, and other hot topics.

Did it spread itself too thin?

According to the New York Times, How About We co-founder Aaron Schildkrout (now the chief executive for This Life, Inc., the parent company of How About We) thinks this will only broaden their opportunities. “We spent the last five years building and scaling HowAboutWe; our unique ‘offline dating’ experience has been used by millions of people and has helped many, many people fall in love. Our new partnership with IAC will help us bring this dating experience to an even larger number of people than ever before.”

This contradicts his statements earlier this year, where he positioned the company to compete heavily with IAC. “The online dating business is completely monopolized — IAC owns online dating,” Schechter told Fortune in January. “So what we’re trying to do is build a media company whose sole focus is love. And we think that’s the way to beat IAC.”

The How About We dating service and media properties were sold to IAC, but a portion of the company remains independent: the couples service. Last month, employees were reportedly left in the dark about whether or not they would be fired in the wake of the acquisition, with some being promised they would stay only later to find that offer recanted.

According to the New York Times, some employees will be moving to IAC, others will be staying to work on the couples service, and some have been laid off.

Most things are going brilliantly for Tinder these days, but one thing most certainly is not. Whitney Wolfe, Tinder’s former vice president of marketing, slapped the company with a sexual discrimination lawsuit at the end of June.

In the suit, Wolfe claims her former boss called her a “whore” at a company event in the presence of Tinder CEO Sean Rad and that she was stripped of her status as a Tinder co-founder. When she complained about her treatment to other executives, including Rad, she says they forced her out of the company.

The story goes back to 2013, when Wolfe and chief marketing officer Justin Mateen dated for several months. After they broke up, Wolfe claims Mateen sent her a series of inappropriate text messages and e-mails filled with racist and sexist language. When she complained to Rad and Match.com CEO Sam Yagan, they allegedly ignored her repeated complaints about his behaviour.

Wolfe also contends that Mateen told her she was not listed in Tinder’s press materials as a co-founder because having “a girl founder” who was just 24-years-old (at the time) would devalue the company. Later, after Mateen allegedly called her a “whore” in front of Rad and other co-workers, Wolfe says she offered to resign in exchange for “modest severance” and the vesting of her stock options. Instead, she claims, she was fired.

John Mullan, one of Wolfe’s attorneys, said in a statement that Wolfe “lost her job simply for refusing to take the abuse any longer.” Another one of her attorneys said “IAC and Match.com, which own Tinder, allowed this culture to exist and did nothing to prevent the discrimination or harassment. IAC and Match.com need to be held responsible for their failure to supervise the executives at Tinder. There really was no ‘adult in the room.’”

In response, IAC indefinitely suspended Mateen. “Through that process, it has become clear that Mr. Mateen sent private messages to Ms. Wolfe containing inappropriate content,” the company said in a statement. “We unequivocally condemn these messages, but believe that Ms. Wolfe’s allegations with respect to Tinder and its management are unfounded.”

The story gets more complex when you try to determine who actually is a legitimate co-founder of Tinder. TechCrunch did an in-depth examination of the people involved in Tinder’s creation and it’s…convoluted, to say the least. It’s hard to see how they themselves can keep up with it all (and maybe they can't), much less anyone else.

Wolfe is seeking compensatory damages, including for lost pay and benefits, as well as punitive damages for emotional distress.

Bad news for Cupid Media and more than 200,000 of its Australian users: the online dating company has been found in breach of privacy laws.

Cupid operates more than 35 niche dating websites, including ChristianCupid, MilitaryCupid, SingleParentLove and other sites based on ethnicity, religion and location. Australian Privacy Commissioner Timothy Pilgrim found Cupid Media breached the Privacy Act by failing to take reasonable steps to secure data held on its websites. As a result of Cupid’s lax approach to security, hackers gained access to the company’s webservers in January of last year and stole the personal information of about 245,000 users. The information included full name, date of birth, email addresses and passwords.

At the root of the security breach is Cupid’s failure to have a password encryption process in place. "Password encryption is a basic security strategy that may prevent unauthorised access to user accounts," said Commissioner Pilgrim. "Cupid insecurely stored passwords in plain text, and I found that to be a failure to take reasonable security steps as required under the Privacy Act."

The commissioner added that the Cupid Media fiasco illustrates the importance of correctly handling personal information that is no longer needed, either by securely destroying or de-identifying it. “Holding onto old personal information that is no longer needed does not comply with the Privacy Act and needlessly places individuals at risk," he explained. "Legally, organisations must identify out-of-date or unrequired personal information and have a system in place for securely disposing with it.”

While online dating companies certainly do need to fiercely protect the massive amounts of personal data they gather, it’s also up to the daters themselves to take the most secure approach possible to dating online. Anyone using an online dating site should regularly update their privacy settings and change their password. It’s also important to remain vigilant about limiting the personal information you share. Only the bare minimums required should be posted online, or you risk becoming the victim of identity theft or a scam.

Commissioner Pilgrim noted that, on the plus side, "Cupid's vulnerability-testing processes did allow it to identify the hack and respond quickly." The company has addressed the security concerns and the investigation is now closed, but the commissioner warns against future attacks: “Hacks are a continuing threat these days, and businesses need to account for that threat when considering their obligation to keep personal information secure."