Ticketmaster agreed to a $ 10 million criminal fine after federal prosecutors said the company used illegally obtained passwords to break into competitor CrowdSurge’s computer systems to harm its business, according to the Justice Department and reports from press.
The huge fee is part of Ticketmaster’s postponed prosecution deal for a criminal investigation of five counts of computer hacking and fraud crimes, according to a statement from the United States Attorney’s Office on Wednesday.
The case stems from former employee Zeeshan Zaidi, head of Ticketmaster’s artist services division, who in October 2019 pleaded guilty to charges of conspiracy to commit computer intrusions and electronic fraud in the scheme. Zaidi was the supervisor of Stephen Mead, a former CrowdSurge executive, according to the press.
“Ticketmaster employees repeatedly – and illegally – accessed an unauthorized competitor’s computers using stolen passwords to collect business intelligence illegally,” said Seth DuCharme, US Attorney General for the Eastern District of New York, in the statement. “In addition, Ticketmaster employees brazenly held a ‘dome’ across the division, in which stolen passwords were used to access the victim company’s computers, as if this were an appropriate business tactic. Today’s resolution demonstrates that any company that obtains a competitor’s confidential information to gain a business advantage, without authority or permission, should expect to be held responsible in federal court. “
A request for comment from Ticketmaster was not answered immediately on Thursday. “Ticketmaster fired Zaidi and Mead in 2017 after their conduct came to light,” Ticketmaster said in a statement emailed to Billboard. “Their actions violated our corporate policies and were inconsistent with our values. We are pleased that this matter is resolved. “
Although the DOJ did not identify the competitor’s name, several reports said it was CrowdSurge, based in DUMBO, where Mead worked from 2010 to 2012.
CrowdSurge handled ticket sales for artists like Alicia Keys, Arcade Fire, Jack White, Macklemore & Ryan Lewis, Paul McCartney and The xx, according to Crunchbase.
Mead, who was hired by Live Nation, Ticketmaster’s parent company, in 2013, a year after leaving his job at CrowdSurge, withheld information about access to the internal drafts of CrowdSurge’s ticket web pages, the DOJ said.
Variety reported that “Mead kept 85,000 company documents on his laptop after leaving his job as general manager of US operations at CrowdSurge. These documents included confidential business plans, strategic and financial information, contracts, customer lists and dozens of usernames and passwords for CrowdSurge’s confidential tools. “
Despite signing a separation agreement in which he agreed to maintain the confidentiality of CrowdSurge’s systems, Mead used his access to monitor his ongoing internal websites in order to “stifle” the competition and “steal back one of his subscriber customers, ”According to the DOJ.
In 2014, Mead “emailed Zaidi and a second Ticketmaster executive several sets of usernames and passwords” to access one of CrowdSurge’s internal products. He “encouraged executives to ‘capture hell outside the system’, but also warned: ‘I must emphasize that, as this is access to a live [victim company] tool I would be careful what you click, as it would be better not to [to] revealing that we are snooping ‘, ”said the DOJ statement.
In 2014, a senior executive at Live Nation asked Mead to use his access during demonstrations at a company meeting in San Francisco, where, in front of at least 14 coworkers, Mead connected to CrowdSurge systems with his username password and password retained, said the DOJ. Mead was promoted in 2015 and received a raise for his work.
CrowdSurge was merged with Songkick in 2015, ending Mead’s access to internal systems, The Verge reported: “In 2017, Songkick sued Live Nation and Ticketmaster for violating antitrust laws. But it soon sold or terminated its services and, in 2018, accepted a $ 110 million deal – plus an undisclosed amount to sell some of its remaining assets to Ticketmaster.
In addition to the criminal fee, under the terms of the deferred prosecution agreement, Ticketmaster is also required to maintain a compliance and ethics program and report to the United States Public Prosecutor’s Office for three years. If the company violates the terms of the agreement, the US Attorney’s Office will file a lawsuit against Ticketmaster on several counts of computer hacking and electronic fraud.