Phoebe Gates, daughter of Microsoft co-founder Bill Gates, and her startup Phia, co-founded with Sophia Kianni, are facing allegations of engaging in "cookie stuffing," an affiliate marketing practice that could lead to substantial financial penalties and civil litigation. The controversy stems from a recent Bloomberg report detailing how Phia's AI-powered browser extension may have automatically placed affiliate tracking cookies on users' devices without proper user interaction, potentially allowing the company to claim commissions for sales it did not generate.
"Wire fraud would have to paint a picture of a knowing scheme that is organized to defraud these individuals (affiliates, businesses etc.) of their money." — Star Kashman, Founding Partner, Cyber Law Firm
Phia, which launched its consumer app and browser extension in April 2025, utilizes artificial intelligence to assist shoppers in comparing products and prices. The company's business model relies, in part, on affiliate marketing, where it would receive commissions for directing customers to major retailers such as Nike, Nordstrom, and Gap. The core of the current allegations, however, suggests a manipulation of this system.
"Cookie stuffing" is a deceptive practice in affiliate marketing where an affiliate tracking cookie is placed on a user's device without the user performing the actions typically required to attribute a purchase to that affiliate. This can include simply visiting a page, rather than actively clicking an affiliate link, thereby potentially allowing the "stuffing" entity to collect commissions for sales it did not legitimately influence. The Bloomberg report specifically cited internal Slack communications and source code that allegedly indicated Phia's founders were aware of automatic cookie-placement features months before public acknowledgment of issues with their attribution system.
While Phia has disputed aspects of Bloomberg's reporting and has not been charged with any crime, the allegations have prompted discussions among legal experts regarding potential consequences. Star Kashman, founding partner of Cyber Law Firm, commented on the possibility of federal wire fraud charges, which carry a statutory maximum sentence of 20 years in prison. However, Kashman emphasized that for such charges to stick, prosecutors would need to prove that Gates knowingly participated in a deliberate scheme to defraud. "This can’t be a careless or negligent error," Kashman told the New York Post, adding, "Wire fraud would have to paint a picture of a knowing scheme that is organized to defraud these individuals (affiliates, businesses etc.) of their money." She also noted that a maximum sentence for a first-time, young entrepreneur without a prior criminal history would be "very unlikely."
Instead, legal experts generally believe that financial penalties and civil litigation are the more probable outcomes based on the currently available information. Companies or other parties that can demonstrate financial losses due to Phia's alleged practices could pursue civil claims related to commissions, contracts, privacy, or consumer protection laws. "If proven to be true, I see it as a likely possibility that herself and/or her company will be taken to court over this alleged scheme," Kashman stated.
Advertising researcher Ben Edelman, who reviewed Phia's practices, described the alleged behavior as "forced clicks" when browser-extension software is involved, although he acknowledged its similarity to cookie stuffing. Edelman argued that such practices unfairly inflate affiliate revenue while imposing additional costs on merchants. Attorney Richard Newman, with over two decades of experience in performance marketing, confirmed that cookie stuffing is generally prohibited under affiliate agreements, with disputes typically handled as contractual matters between private parties, often resulting in the loss of commissions for the offending affiliate.
The controversy appears to have already had a tangible financial impact on Phia. Bloomberg reported a significant drop in the startup's average daily revenue, from approximately $80,000 to between $10,000 and $28,000, after the disputed features were disabled. Phia, for its part, has attributed this decline partly to its decision to turn off most of its monetization efforts. As of now, no criminal charges, including wire fraud, have been filed against Phoebe Gates or Phia. The discussion of a 20-year prison sentence remains a reference to the statutory maximum for a potential wire fraud charge, as analyzed by legal experts.
