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Habbo investors dump shares over grooming investigation

Balderton Capital said to drop 13% stake in Sulake over pending C4 expose UPDATE: Sulake CEO responds as more details emerge from Channel 4


Sulake CEO Paul LaFontaine has issued a further statement to GamesIndustry International regarding the Channel 4 investigation and the withdrawal of investors.

"I was incredibly concerned to see this report and to hear about the findings of the Channel Four News investigation. As a parent, I understand the critical importance of making sure teenagers and young people have a safe online experience," said LaFontaine.

"I was sorry to hear of Balderton's decision to withdraw its involvement, but my priority right now is to address the issues raised by the investigation. In response to Ben's report, I would like to reassure readers that we at Sulake remain fully committed to the Habbo community and to resolving the issues it currently faces.

"Habbo has a strong record in this area with industry commendations and deep experience experience actively preventing potentially damaging content. Since hearing about the report I have asked my team to tighten security across the site and to strengthen the user rules even further.

I want to take this opportunity to assure our site users that I will be working with my team globally to deliver improved safety levels across the community. Anyone who is concerned can contact me directly on Twitter @PaulLaFo."

LaFontaine also urged anyone with concerns over the safety of Habbo Hotel to read the statement previously issued on the company blog.

Channel 4 has also revealed more information on its investigation into Habbo, documenting the experiences of a journalist who spent two months playing the game online.

"Seemingly innocent, Habbo Hotel, with its bright colours, pink teddy bears, flashing lights, and roaming ponies, is one of a growing number of virtual worlds created for kids," reads a channel 4 release. "And with 10 million unique visitors a month, it is 'the world's largest social game and online community for teenagers'."

"The chat was very sexual, perverse, violent, pornographic, overtly sexual acts, people saying they were going to do things to others, and it was very graphic," said investigator Rachel Seifert.

"Within two minutes I was being asked individually 'do you have a webcam?', 'can we chat on (instant messenger service) MSN, on Skype?' I was also within a couple of minutes asked to strip, fully naked, and asked what would I do on a webcam."

Channel 4 news also employed the services of John Carr, "one of the world's leading experts on child safety."

"A moderator should be jumping in right now as it's not hard to see where this is going before it gets a lot worse," said Carr, watching Seifert's online experiences in Habbo Hotel. "This is very worrying and going in a very bad direction."

"Here's someone aged 11 being asked to leave the site. There should be the equivalent of the virtual fire-brigade on this, but it's not happening.

"If I was a parent of an 11-year old girl on this site, I would want there to be a moral panic. This should not be happening. What I've just seen makes me think this is a dangerous place for youngsters to be.

"Businesses shouldn't put children at risk. If they are in this business, they have to be in it in the right way - the right moderators, the right software, to stop this happening."

Original story

Major shareholders in Sulake, the company which runs children's social network Habbo Hotel, are reportedly returning their investment in the firm after learning of an impending Channel 4 expose of grooming in the site's chat rooms.

The story is being reported by The Kernel, with the presumably somewhat over-sexed headline of "Habbo Exposed as Paedophile Haven".

According to that story, Balderton Capital, which owns a thirteen per cent stake in Sulake, is returning its investment in the company after learning of a news investigation into chatroom behaviour due to be broadcast at 7pm tonight on Channel 4 in the UK.

In that investigation, its believed that allegations will be made that active grooming of 14 year olds is taking place on the site, alongside the usual low-level grotesque commentary which plagues so many such facilities.

"This is a space we know very well, as investors in several other similar companies, for example Bebo and Weeworld," reads a statement which The Kernel attributes to Balderton.

"We were given some information a week ago that profoundly shocked us. We had to ask ourselves whether we were comfortable being investors in a business where children were not being adequately protected.

"We didn't take this decision lightly, as we have been investors in Sulake for over 8 years, but the standards required to run a website that children have access to are very high. We felt the company was not meeting those standards."

Sulake CEO Paul LaFontaine has issued a statement on the company site which obliquely addresses the general issues of freedom of expression and Sulake's responsibility for content, but does not expressly deal with the withdrawal of any investor support.

"Speaking as a CEO, it's an incredibly rewarding job to have responsibility for an online community like Habbo," says LaFontaine. "Our site provides a forum for millions of young people from across the world to share views, interests and ideas through the characters they create.

"The freedom to explore the site and freely interact with other users is one of the reasons why we are one of the most popular online destinations for teenagers; there have been more than 265 million Habbo users in total and up to a further three million users join each month.

"To keep users safe, we filter content and block inappropriate users. We also employ more than 225 moderators, tracking some 70 million lines of conversation globally every day on a 24/7 basis.

"We work with child safety organisations and local police forces to address inappropriate behaviour. Habbo's leading safety systems were recognised as making the service one of the safest social networks in a 2011 European Commission report. Last year we were also awarded the commendation of 'Safer by Design' from the Child Exploitation and Online Protection Centre (CEOP).

"Alongside the time and resource we invest to ensure that Habbo is one of the safest online communities, we also encourage our users to take responsibility for reporting any abuses on the site. This is why we provide education and rapid-response support to users who may experience uncomfortable conversations."

Other sources in the Kernel story have questioned the wisdom of Balderton dumping the investment, calling it "cowardly".

"Assigning culpability to Sulake for illegal activity on Habbo is something equivalent to blaming eBay for rogue sellers," said an unnamed source.

"Habbo is a platform business with some moral responsibility for activity on its network, but it cannot be expected to police every transaction. And the company has not broken any law."

Both Balderton and Sulake have been contacted for confirmation and further comment, but have so far not made a response.

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