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After discovering that users had been using the service to seek sexual partners, he launched Adult Friend Finder as a spin-off, followed later by other spin-offs dealing with different regions and niches.
Much of the company's growth without investment capital has been attributed to its affiliate program, with more than 500,000 affiliates to date.
Its flagship online dating services include Friend Finder and its various spin-off services (such as Adult Friend Finder, and other dating services targeting various territories and niche categories, such as the South America-focused Amigos.com, and Christian dating website Big Church), as well as niche websites for alternative lifestyles, and adult webcam websites.
Friend Finder had not turned a net profit since at least 2008.
Ezra Shashoua, the company's chief financial officer, blamed the lower revenue on a drop in membership and increased advertising costs for affiliates, according to court documents.
British broadcaster Channel 4 reported Thursday that the website had been breached, although information regarding the breach had been trickling out in a low-key way for some time.
Friend Finder Networks, a California-based company that owns Adult Friend Finder and other dating websites, said in an advisory that it has contacted law enforcement and is investigating.
As of January 17, 2010, Friend Finder Networks had a negative net worth equal to $118 million, $32 million in cash on hand and $650 million in liabilities.
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The company had also indicated that it lacked existing cash or cash from operations to repay a .5 million debt that was due July 31.
The site can only be reached using the Tor Web browser.
The files contain hundreds of thousands of email addresses purportedly of Adult Friend Finders users.
It has cautioned that, unless it can repay or restructure its obligation, it will face “a material deficiency in our short term liquidity.” With these shortfalls in mind, the company again announced an intention to make an initial public offering of stock, representing a 49% stake in the company, with plans to use the proceeds to pay down its debt and become listed on the New York Stock Exchange.
The contemplated public offering, scheduled to reach the market on January 27, 2010 was delayed by FFN.