Fact-checking website Snopes said it may shut down over a dispute with a vendor that is withholding advertising revenue.

Fact-checking website Snopes said it may shut down over a dispute with a vendor that is withholding advertising revenue.

The 23-year-old site announced on Monday said it was "in danger of closing its doors" over a dispute with Proper Media, whom Snopes founder David Mikkelson claimed is holding Snopes "hostage" by barring the site from making modifications, placing new ads, and receiving revenue from existing ads.
A GoFundMe set up by Snopes to fund its staff of 16 and operating costs had raised over $200,000 within hours of launching on Monday.

"In a general sense, I'm chagrined, because we have always been a self-supporting company, and I don't like asking the public for money," Mikkelson told Business Insider in an interview. "But we've been boxed into this position, we've been cut off from what we usually get, we don't have any other way."

Snopes' fundraising drive caps what is a contract and partial-acquisition gone wrong.

In 2015, Mikkelson contracted with Proper Media to provide web development services to help grow the site and add advertising revenue. But when Mikkelson and his wife divorced in 2016, the five individuals who own equity in Proper Media became more involved by purchasing his ex-wife's 50% share of Snopes' parent company, Bardav, which they financed by taking out a substantial loan.

But in the months since the purchase, Mikkelson clashed with the company, which he felt was siphoning off too much advertising revenue from Snopes, and which he claimed was not performing essential services like sharing ad revenue in a timely fashion and sharing web traffic information.

Earlier this year, Proper Media shareholder Vincent Green resigned from the company and joined Snopes, which Mikkelson claims gives the two of them majority control of Bardav, and allowed them to terminate the contract between Proper Media and Snopes.

For its part, Proper Media claimed that Mikkelson and Green are in breach of contract, saying Green's share of the company did not travel with him when he joined Snopes.

The site suggested that Mikkelson has "repeatedly engaged in fraud upon Proper Media" in an "effort to obtain approval for Bardav to pay Mikkelson a sizable salary and large sums of Mikkelson’s personal expenses," including a $10,000 company traveling expense to pay for Mikkelson's honeymoon with his wife Elyssa Young, who is also a Snopes employee.

And counter to Mikkelson's claim, last week, Proper Media released $100,000 to Bardav recently with a judge's stipulation that Mikkelson would not be allowed to manage the money.

"This case involves unlawful jockeying for ownership and control of the fact-checking website Snopes.com," Proper Media said in a May complaint filed in San Diego. "But while Snopes is built entirely around the concepts of transparency and truth, its founder, Defendant David Mikkelson, has engaged in a lengthy scheme of concealment and subterfuge to gain control of the company and to drain its profits."

Proper Media attorney Karl Kronenberger told Business Insider that Mikkelson could also move his site over to another content management system.

"He can move it at any time, and he hosted the site for years," Kronenberger said. "The problem is he wants proper media's expertise, but he doesn't want to pay for it."

According to the Snopes founder, Proper Media has not honored its contract, which allows Snopes' parent company Bardav to move its web development, CMS, and other services away from Proper Media if it decides to terminate its contract.

Meanwhile, several Proper Media founders relocated to Puerto Rico, which Green said is part of a tax avoidance scheme, and which Kronenberg said is a business development strategy.

Mikkelson claimed that Proper Media was regularly late with sharing its ad revenue with Snopes, and has not shared any revenue with the site since February, several weeks before Mikkelson gave notice to terminate Snopes' contract with Proper Media.

A court is set for August 4 to hear competing motions from Proper Media and its two majority equity holders and Mikkelson and Bardav. Proper Media is aiming to remove Mikkelson from the company, while Mikkelson said he is seeking to allow Snopes to stop using Proper Media for web services.

Snopes has long been a site that's dedicated to fact-checking urban legends. Since its inception in 1994, it has grown to become one of the most prominent website to fact-check conspiracy theories and "fake news" online. Snopes formed a partnership last year with Facebook to begin vetting some viral news stories to ensure that Facebook's newsfeed become more accurate.

Source: Business Insider