FTC Probes Ashley Madison Over Breach

Avid Life Media (ALM), the parent company of infidelity dating site Ashley Madison, is being investigated by the FTC, according to a Reuters report citing anonymous sources.

In June 2015, a hacker group called the “Impact Team” broke into Ashley Madison’s back end and stole user data. Credit card data was among the credentials stolen, but the real damaging material was the information that enabled the hackers to release lists of emails of people using the site. Some of the data that was reportedly compromised was related to its customers’ secret sexual fantasies — matched with their credit card transactions data, of course.

While the drama behind the Ashley Madison hack continued and ALM’s CEO stepped down, it appears things have just gotten worse for the company. And this news about an FTC investigation comes just as Rob Segal was named the new CEO of ALM. That’s on top of the revenue sting the breach had on the company, which was reportedly a quarter of its revenue, according to an interview Segal and President James Millership did with Reuters.

“We are profoundly sorry,” Segal said in the interview. In that conversation, he also noted that the company should have evaluated spending more on security. Now, however, the company is investing millions into its security measures, including adding payment options that protect its customers better. The company has said that it still does not know who specifically is responsible for the hack.

Meanwhile, in both the U.S. and Canada, ALM faces lawsuits from impacted customers who had personal credentials posted online following the breach. There are other claims that the company posted misleading profiles that were actually fake. This allegation came because the site’s male-to-female ratio is five-to-one.

In a report commissioned by Avid by Ernst & Young, the conclusion was that there were computer programs used to create what are called “fembots” to create profiles of “women” in order to get the conversation going with more male customers, keeping them paying Ashley Madison.

While these profiles were reportedly shut down in 2014 in the U.S. and Canada, and a year later in its other markets, the report concluded that users were still communicating with these alleged bots until late last year. And that’s why the FTC has gotten deeper into this case. A similar situation arose in 2014 that resulted in a settlement above $600,000 for such practices.

ALM has said that it doesn’t know the exact details of the FTC investigation, but Segal did say: “That’s a part of the ongoing process that we’re going through … it’s with the FTC right now.”

As for what’s next for the company? A new approach, he said, but he didn’t specify what that entailed.

“We certainly feel that the Ashley Madison brand can be repositioned,” Segal said in the interview.