Home / Tech News / Dating app maker Match sued by FTC for fraud

Dating app maker Match sued by FTC for fraud


Dating app maker Match sued by FTC for fraud – TechCrunch

They’re just not that into you. Or maybe it was a bot? The U.S. Federal Trade Commission on Wednesday announced it has sued Match Group, the owner of just about all the dating apps — including Match, Tinder, OKCupid, Hinge, PlentyofFish, and others — for fraudulent business practices. According to the FTC, Match tricked hundreds of thousands of consumers into buying subscriptions, exposed customers to the risk of fraud, and engaged in other deceptive and unfair practices.

The suit focuses only on Match.com and boils down to this: Match.com didn’t just turn a blind eye to its massive bot and scammer problem, the FTC claims. It knowingly profited from it. And it made deceiving users a core part of its business practices.

The charges against Match are fairly significant.

The FTC says that most consumers aren’t aware that 25 to 30 percent of Match registrations per day come from scammers. This includes romance scams, phishing scams, fraudulent advertising, and extortion scams. During some months from 2013 to 2016, more than half the communications taking place on Match were from accounts the company identified as fraudulent.

Bots and scammers, of course, are a problem all over the web. The difference is that, in Match’s case, it indirectly profited from this, at consumers’ expense, the suit claims.

The dating app sent out marketing emails (i.e., the “You caught his eye” notices) to potential subscribers about new messages in the app’s inbox. However, it did so after it had already flagged the message’s sender as a suspected bot or scammer.

Screen Shot 2019 09 26 at 2.57.37 PM

“We believe that Match.com conned people into paying for subscriptions via messages the company knew were from scammers,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “Online dating services obviously shouldn’t be using romance scammers as a way to fatten their bottom line.”

From June 2016 to May 2018, Match’s own analysis found 499,691 consumers signed up for subscriptions within 24 hours of receiving an email touting the fraudulent communication, the FTC said. Some of these consumers joined Match only to find the message that brought them there was a scam. Others joined after Match deleted the scammers’ account, following its fraud review process. That left them to find the account that messaged them was now “unavailable.”

In all cases, the victims were now stuck with a subscription — and a hassle when they tried to cancel.

Because of Match’s allegedly “deceptive advertising, billing, and cancellation practices,” consumers would often try to reverse their charges through their bank. Match would then ban the users from the app.

Related to this, Match is also in violation of the “Restore Online Shoppers’ Confidence Act” (ROSCA) by failing to provide a simple way for customers to stop the recurring charges, the FTC says. In 2015, one Match internal document showed how it took over 6 clicks to cancel a subscription, and often led consumers to thinking they canceled when they did not.

Screen Shot 2019 09 26 at 2.59.35 PM

And the suit alleges Match tricked people into free, six-month subscriptions by promising them they wouldn’t have to pay if they didn’t meet someone. It didn’t, however, adequately disclose that there were other, specific steps that had to be taken, involving how they had to use their subscription or redeem their free months.

Screen Shot 2019 09 26 at 2.58.39 PM

Match, naturally, disputes the matter. It claims that it is, in fact, fighting fraud and that it handles 85% of potentially improper accounts in the first four hours, often before they become active. And it handles 96% of those fraudulent accounts within a day.

“For nearly 25 years Match has been focused on helping people find love, and fighting the criminals that try to take advantage of users. We’ve developed industry-leading tools and A.I. that block 96% of bots and fake accounts from our site within a day and are relentless in our pursuit to rid our site of these malicious accounts,” Match stated, in response to the news. “The FTC has misrepresented internal emails and relied on cherry-picked data to make outrageous claims and we intend to vigorously defend ourselves against these claims in court.”

The Match Group, as you may know, loves to have its day in court.

The FTC’s lawsuit isn’t the only one facing Match’s parent company because it doesn’t (allegedly) play fair.

A group of Tinder execs are currently suing Match and its controlling shareholder IAC for manipulating financial data to strip them of their stock options. The suit today continues, even though some plaintiffs had to drop out because Match had snuck an arbitration clause into its employees’ recent compliance acknowledgments.

Now those former plaintiffs are acting as witnesses, and Match is trying to argue that the litigation funding agreement overcompensates them for their testimony in violation of the law. The judge called that motion a “smoke screen” and an attempt to “litigate [the plaintiffs] to death until they settle.”

The Match Group also got into it with Tinder’s rival Bumble, which it failed to acquire twice. It filed a lawsuit over infringed patents, which Bumble said was meant to bring down its valuation. Bumble then filed and later dropped its own $400M suit over Match fraudulently obtaining Bumble’s trade secrets.

In the latest lawsuit, the FTC is asking Match to pay back the “ill-gotten” money and wants to impose civil penalties and other relief. While the financial impacts may not be enough to take down a company with the resources of Match, the headlines from the trial could bring about an increase in negative consumer sentiment over Match and online dating in general. It’s a business that’s become commonplace and normalized in society, but also has a reputation of being a little scammy at times, too. This suit won’t help.

And given that Match Group operates a majority of the U.S.’s top dating apps, that could have a larger, trickle-down effect on its broader business.

The FTC suit is available below.

ntn”,”protected”:false},”excerpt”:”rendered”:”

Travis VanderZanden is perhaps one of the best known electric scooter startup founders in the business. Although his business, Bird, competes with the likes of Uber and Lyft these days, VanderZanden has been all-in on micromobility since 2017, when Bird deployed its first batch of scooters on the streets of Santa Monica. Since then, the […]n”,”protected”:false,”author”:9528656,”featured_media”:1886385,”comment_status”:”open”,”ping_status”:”closed”,”sticky”:false,”template”:””,”format”:”standard”,”meta”:”outcome”:””,”status”:””,”crunchbase_tag”:0,”amp_status”:””,”relegenceEntities”:[],”relegenceSubjects”:[],”jetpack_publicize_message”:”Bird CEO Travis VanderZanden to talk scooters, unit economics and multibillion-dollar valuation https://tcrn.ch/2mDO9wC by @meganrosedickey”,”categories”:[17396],”tags”:[48300,576630263,66411,108835959],”crunchbase_tag”:[],”tc_stories_tax”:[],”tc_event”:[576608002],”jetpack_featured_media_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png”,”jetpack_publicize_connections”:[],”shortlink”:”https://tcrn.ch/2mDO9wC”,”rapidData”:”pt”:””,”pct”:””,”featured”:false,”subtitle”:””,”fundingRound”:false,”seoTitle”:””,”seoDescription”:””,”premiumContent”:false,”premiumCutoffPercent”:1,”tc_cb_mapping”:[“slug”:”bird”,”cb_name”:”Bird”,”cb_slug”:”bird-organization”,”cb_link”:”https://crunchbase.com/organization/bird”,”slug”:”travis-vanderzanden”,”cb_name”:”Travis VanderZanden”,”cb_slug”:”travis-vanderzanden-person”,”cb_link”:”https://crunchbase.com/person/travis-vanderzanden”],”associatedEvent”:”ad”:”display”:true,”title”:”Meet the leaders of Slack, OpenAI, Naspers, and more… – Save $600 on passes now”,”override_link”:”https://techcrunch.com/events/disrupt-sf-2019/tickets?ref=eventarticlebar&unii-trigger-open=MJ9SC8″,”date”:1569974400,”link”:”https://techcrunch.com/events/disrupt-sf-2019/”,”status”:”pre”,”title”:”Disrupt SF 2019″,”termID”:576608002,”event”:1696184,”authors”:[9528656],”hideFeaturedImage”:false,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts/1885327″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/types/post”],”version-history”:[“count”:5,”href”:”https://techcrunch.com/wp-json/wp/v2/posts/1885327/revisions”],”predecessor-version”:[“id”:1887496,”href”:”https://techcrunch.com/wp-json/wp/v2/posts/1885327/revisions/1887496″],”authors”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/tc/v1/users/9528656″],”replies”:[“embeddable”:true,”count”:0,”href”:”https://techcrunch.com/wp-json/wp/v2/comments?post=1885327&order=asc&tc_hierarchical=flat”],”https://techcrunch.com/edit”:[“href”:”https://techcrunch.com/wp-admin/post.php?post=1885327&action=edit”],”author”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/tc/v1/users/9528656″],”wp:featuredmedia”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/media/1886385″],”wp:attachment”:[“href”:”https://techcrunch.com/wp-json/wp/v2/media?parent=1885327″],”wp:term”:[“taxonomy”:”category”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/categories?post=1885327″,”taxonomy”:”post_tag”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tags?post=1885327″,”taxonomy”:”_tc_cb_tag_taxonomy”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/crunchbase_tag?post=1885327″,”taxonomy”:”tc_stories_tax”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_stories_tax?post=1885327″,”taxonomy”:”tc_event”,”embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_event?post=1885327″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true],”_embedded”:{“authors”:[“id”:9528656,”name”:”Megan Rose Dickey”,”url”:””,”description”:”Megan Rose Dickey is a senior reporter at TechCrunch focused on diversity, inclusion and social justice. She also covers transportation and the on-demand economy.rnrnShe previously spent two years at Business Insider covering tech startups focused on the shared economy, IoT and music industry.rnrnShe graduated from the University of Southern California in 2011 with a degree in Broadcast and Digital Journalism.rnrn- See more at: https://www.crunchbase.com/person/megan-rose-dickey#sthash.ir4VFt2z.dpufrnrnPGP fingerprint for email is:u00a02FA7 6E54 4652 781A B365 BE2E FBD7 9C5F 3DAE 56BD”,”link”:”https://techcrunch.com/author/megan-rose-dickey/”,”slug”:”megan-rose-dickey”,”avatar_urls”:”24″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=24&d=identicon&r=g”,”48″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=48&d=identicon&r=g”,”96″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=96&d=identicon&r=g”,”links”:”facebook”:”https://www.facebook.com/meganrosedickey”,”twitter”:”https://twitter.com/meganrosedickey”,”linkedin”:”http://www.linkedin.com/in/meganrosedickey”,”crunchbase”:”https://www.crunchbase.com/person/megan-rose-dickey”,”position”:”Senior Reporter”,”cbDescription”:”

Megan Rose Dickey is a senior reporter at TechCrunch focused on diversity, inclusion and social justice. She also covers transportation and the on-demand economy.nn

She previously spent two years at Business Insider covering tech startups focused on the shared economy, IoT and music industry.nn

She graduated from the University of Southern California in 2011 with a degree in Broadcast and Digital Journalism.”,”cbAvatar”:”https://crunchbase-production-res.cloudinary.com/image/upload/v1476472700/amx5oywdjjgelykqbmk0.jpg”,”twitter”:”meganrosedickey”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/tc/v1/users/9528656″],”collection”:[“href”:”https://techcrunch.com/wp-json/tc/v1/users”]],”author”:[“id”:9528656,”name”:”Megan Rose Dickey”,”url”:””,”description”:”Megan Rose Dickey is a senior reporter at TechCrunch focused on diversity, inclusion and social justice. She also covers transportation and the on-demand economy.rnrnShe previously spent two years at Business Insider covering tech startups focused on the shared economy, IoT and music industry.rnrnShe graduated from the University of Southern California in 2011 with a degree in Broadcast and Digital Journalism.rnrn- See more at: https://www.crunchbase.com/person/megan-rose-dickey#sthash.ir4VFt2z.dpufrnrnPGP fingerprint for email is:u00a02FA7 6E54 4652 781A B365 BE2E FBD7 9C5F 3DAE 56BD”,”link”:”https://techcrunch.com/author/megan-rose-dickey/”,”slug”:”megan-rose-dickey”,”avatar_urls”:”24″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=24&d=identicon&r=g”,”48″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=48&d=identicon&r=g”,”96″:”https://secure.gravatar.com/avatar/e64a35398ab7fb3ff0de4f0817dc1c78?s=96&d=identicon&r=g”,”links”:”facebook”:”https://www.facebook.com/meganrosedickey”,”twitter”:”https://twitter.com/meganrosedickey”,”linkedin”:”http://www.linkedin.com/in/meganrosedickey”,”crunchbase”:”https://www.crunchbase.com/person/megan-rose-dickey”,”position”:”Senior Reporter”,”cbDescription”:”

Megan Rose Dickey is a senior reporter at TechCrunch focused on diversity, inclusion and social justice. She also covers transportation and the on-demand economy.nn

She previously spent two years at Business Insider covering tech startups focused on the shared economy, IoT and music industry.nn

She graduated from the University of Southern California in 2011 with a degree in Broadcast and Digital Journalism.”,”cbAvatar”:”https://crunchbase-production-res.cloudinary.com/image/upload/v1476472700/amx5oywdjjgelykqbmk0.jpg”,”twitter”:”meganrosedickey”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/tc/v1/users/9528656″],”collection”:[“href”:”https://techcrunch.com/wp-json/tc/v1/users”]],”wp:featuredmedia”:[“id”:1886385,”date”:”2019-09-25T09:04:49″,”slug”:”screen-shot-2019-09-25-at-12-04-25-pm”,”type”:”attachment”,”link”:”https://techcrunch.com/2019/09/25/bird-ceo-travis-vanderzanden-to-talk-scooters-unit-economics-and-multibillion-dollar-valuation/screen-shot-2019-09-25-at-12-04-25-pm/”,”title”:”rendered”:”Screen Shot 2019-09-25 at 12.04.25 PM”,”author”:24273062,”license”:””,”authors”:[24273062],”caption”:”rendered”:”

Screen Shot 2019 09 25 at 12.04.25 PMn”,”alt_text”:”travis vanderzanden disrupt”,”media_type”:”image”,”mime_type”:”image/png”,”media_details”:”width”:1930,”height”:1276,”file”:”2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png”,”sizes”:”thumbnail”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=150,99″,”width”:150,”height”:99,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=150″,”medium”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=300,198″,”width”:300,”height”:198,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=300″,”medium_large”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=768,508″,”width”:768,”height”:508,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=1024″,”large”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=680,450″,”width”:680,”height”:450,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=680″,”guest-author-32″:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=32,32″,”width”:32,”height”:32,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=32&h=32&crop=1″,”guest-author-50″:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=50,50″,”width”:50,”height”:50,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=50&h=50&crop=1″,”guest-author-64″:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=64,64″,”width”:64,”height”:64,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=64&h=64&crop=1″,”guest-author-96″:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=96,96″,”width”:96,”height”:96,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=96&h=96&crop=1″,”guest-author-128″:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=128,128″,”width”:128,”height”:128,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=128&h=128&crop=1″,”concierge-thumb”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png?resize=50,33″,”width”:50,”height”:33,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png?w=50″,”full”:”file”:”Screen-Shot-2019-09-25-at-12.04.25-PM.png”,”width”:1024,”height”:677,”mime_type”:”image/png”,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png”,”image_meta”:”aperture”:”0″,”credit”:””,”camera”:””,”caption”:””,”created_timestamp”:”0″,”copyright”:””,”focal_length”:”0″,”iso”:”0″,”shutter_speed”:”0″,”title”:””,”orientation”:”0″,”keywords”:[],”filesize”:2816925,”source_url”:”https://techcrunch.com/wp-content/uploads/2019/09/Screen-Shot-2019-09-25-at-12.04.25-PM.png”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/media/1886385″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/media”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/types/attachment”],”replies”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/comments?post=1886385″],”author”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/tc/v1/users/24273062″]],”wp:term”:[[“id”:17396,”link”:”https://techcrunch.com/tc/”,”name”:”TC”,”slug”:”tc”,”taxonomy”:”category”,”parent”:0,”rapidData”:”pt”:””,”pct”:””,”submenu_categories”:[],”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/categories/17396″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/categories”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/category”],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?categories=17396″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc-media-gallery?categories=17396″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?categories=17396″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true]],[“id”:48300,”link”:”https://techcrunch.com/tag/bird/”,”name”:”bird”,”slug”:”bird”,”taxonomy”:”post_tag”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags/48300″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/post_tag”],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?tags=48300″,”href”:”https://techcrunch.com/wp-json/wp/v2/battlefield-companies?tags=48300″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc-media-gallery?tags=48300″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_topic?tags=48300″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?tags=48300″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true],”id”:576630263,”link”:”https://techcrunch.com/tag/disrupt-sf-2019/”,”name”:”Disrupt SF 2019″,”slug”:”disrupt-sf-2019″,”taxonomy”:”post_tag”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags/576630263″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/post_tag”],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?tags=576630263″,”href”:”https://techcrunch.com/wp-json/wp/v2/battlefield-companies?tags=576630263″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc-media-gallery?tags=576630263″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_topic?tags=576630263″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?tags=576630263″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true],”id”:66411,”link”:”https://techcrunch.com/tag/scooters/”,”name”:”Scooters”,”slug”:”scooters”,”taxonomy”:”post_tag”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags/66411″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/post_tag”],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?tags=66411″,”href”:”https://techcrunch.com/wp-json/wp/v2/battlefield-companies?tags=66411″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc-media-gallery?tags=66411″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_topic?tags=66411″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?tags=66411″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true],”id”:108835959,”link”:”https://techcrunch.com/tag/travis-vanderzanden/”,”name”:”Travis VanderZanden”,”slug”:”travis-vanderzanden”,”taxonomy”:”post_tag”,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags/108835959″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tags”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/post_tag”],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?tags=108835959″,”href”:”https://techcrunch.com/wp-json/wp/v2/battlefield-companies?tags=108835959″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc-media-gallery?tags=108835959″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_topic?tags=108835959″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?tags=108835959″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true]],[],[],[“id”:576608002,”link”:”https://techcrunch.com/event-type/disrupt/disrupt-sf-2019/”,”name”:”Disrupt SF 2019″,”slug”:”disrupt-sf-2019″,”taxonomy”:”tc_event”,”rapidData”:”pt”:””,”pct”:””,”_links”:”self”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tc_event/576608002″],”collection”:[“href”:”https://techcrunch.com/wp-json/wp/v2/tc_event”],”about”:[“href”:”https://techcrunch.com/wp-json/wp/v2/taxonomies/tc_event”],”up”:[“embeddable”:true,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_event/579419″],”wp:post_type”:[“href”:”https://techcrunch.com/wp-json/wp/v2/posts?tc_event=576608002″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_events?tc_event=576608002″,”href”:”https://techcrunch.com/wp-json/wp/v2/tc_video?tc_event=576608002″],”curies”:[“name”:”wp”,”href”:”https://api.w.org/rel”,”templated”:true]]]}}],”ec”:[{“id”:1885929,”date”:”2019-09-24T16:47:07″,”date_gmt”:”2019-09-24T23:47:07″,”guid”:”rendered”:”https://techcrunch.com/?p=1885929″,”modified”:”2019-09-24T21:35:48″,”modified_gmt”:”2019-09-25T04:35:48″,”slug”:”ceo-ouster-looming-layoffs-and-devaluation-turn-wework-into-cautionary-tale”,”status”:”publish”,”type”:”post”,”link”:”https://techcrunch.com/2019/09/24/ceo-ouster-looming-layoffs-and-devaluation-turn-wework-into-cautionary-tale/”,”title”:”rendered”:”CEO ouster, looming layoffs and devaluation turn WeWork into cautionary tale”,”content”:{“rendered”:”

Major layoffs are all but inevitable at high-flying real estate startup WeWork after Adam Neumann succumbed to pressure today to step down as CEO and take the role instead of non-executive chairman of the company he cofounded nine years ago.n

Two well-placed sources tell us that the scope is likely to be massive, and includes some of of its newest business divisions, which these same sources anticipate will be jettisoned to get the company’s focus back on its core business. One of these sources speculates that over time, up to half of WeWork’s 15,000 employees — 9,000 of whom have been brought on in the last two years — could be laid off to shore up the unprofitable company’s expenses. The sentiment echoes a new piece in The Information that reports a “group of executives from WeWorku2019s parent company and bankers” have discussed laying off as many as 5,000 employeesu2014a third of its workforce.n

Neumann won’t have as much say in the matter, either. As part of his departure from the role, he has agreed to further reduce the power of his supervoting shares from an original 20 votes for every one vote that a regular investor in WeWork would receive to just three, reports Bloomberg. His wife, Rebekah, a cofounder who is thought by insiders to have played a heavy role in the company’s original — and highly atypical — IPO prospectus, is also leaving the business.n

It’s rather breathtaking, the speed with which the couple was just elbowed aside. Still, some others involved in the company look poised to get a far worse deal. The Japanese conglomerate SoftBank currently stands to lose billions of dollars on its investment in the company — if it doesn’t wind up writing down nearly the entire investment.u00a0 Even an aggressive ratchet clause won’t do much to protect SoftBank if WeWork’s shares eventually sink on the public market.n

It would seem an extreme correction to a culture that had become, well, anything but restrained. It’s also far from clear that it would have the intended effect of attracting public shareholders to the company, whose wheels began to come off when SoftBank first plugged $4.4 billion into WeWork roughly two years ago, according to our sources. (Roughly $6 billion more would follow.) As says one of these individuals, who has known Neumann for many years, “Adam already had a healthy ego. What the f_ck do you think is going to happen when he’s given billions of dollars?”n



Source link

About admin

Check Also

New NVIDIA Shield Android TV streaming device leaks via Amazon listing

New NVIDIA Shield Android TV streaming device leaks via Amazon listing – TechCrunch Darrell Etherington …

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!