Hydra Network Financial and Legal Nightmare
This post is going to be quite long, and might possibly be a little difficult to follow as it involves many parties, many lawsuits, and many sources of information. The legal documents involved span hundreds of pages and so doing a summary like this is difficult, especially because Nickycakes is not a lawyer and has no real legal experience when it comes to civil suits. Nicky is going to do his best to keep everything factual and based on the court documents provided, but if he misses anything, feel free to contact via comments or email for corrections to be made.
First off, Nicky has had very little personal interaction with Hydra. He ran a couple hundred bucks of leads to a campaign with them a few years ago for which he was paid in full, and after that has had no real dealings other than picking up a free hat from their booth at a show and some back-and-forth on some forums with one of their execs.
Let’s get started with our little timeline of events:
The “Walkers”
At the end of 2008 3 of the 4 partners running HydraNetwork, Doug Walker and two sons Adam and Jason were fired by the board of directors, leaving the current CEO, Zac Brandenberg as the sole partner remaining, although the Walkers still held an almost 40% share in the company.
In May, 2009, the walkers started a network called W4, which many of you have probably heard of. Hydra then sued them for violating the noncompete agreements they had signed while with Hydra.
The Walkers then sued Hydra for firing them, since they had a fairly large stake in the company, claiming that their firing resulted in a huge decrease in value of a company they owned a part of. One quote from that suit:
“Before the defendants engaged in their misconduct, Hydra was projected to generate some $150 million in revenue and substantial profits in 2009. Today, Hydra will be lucky to generate revenue of half that amount and avoid a loss.”
The Walkers believed that Brandenberg had been planning on getting rid of them for months for personal gain of authority in the company as well as equity in Hydra.
Alright, blah blah, both sides arguing over a bad breakup. You can read a post from August 09 detailing most of this from LA Business Journal. A little drama, some lawsuits, and a forecast by the Walkers of huge revenue decrease. Interesting, but there was more drama to come.
Jason Walker allegedly fired off an email to Hydra employees and investors that said some not so nice things about Zac and new manager Louis Amoroso. So, big shocker, Zac and Louis sue for $1m plus punitive damages for defamation. Quote:
“On April 3, 2009, after receiving notice of his removal as a manager of Hydra, Jason sent an e-mail to Kanye Anderson employees, Krisnan Ramaswami (Hydra board member), Jack Isaacs (Hydra board member), Neil Malik and to Ed Roberto, the interim President of Hydra, claiming expressly and/or inferentially that Amoroso was a felon, a frequenter of hookers, gambling and liquor and that Brandenberg: (1) consorts with felons; (2) Along with Amoroso, committed acts of dishonesty and fraud in connection with his previous employment, including wrongfully starting a competing business while still employed and converting his prior employer’s assets and, ultimately, causing both companies to go “belly up;” (3) was incompetent and incapable of performing the duties for which he was hired; and (4) is failing to perform his duties for Hydra.”
The lawsuit lists several other emails sent by Jason and Adam Walker claiming that Zac was trying to steal their share of the business.
Nickycakes was able to obtain the – COURT DOC MIRROR
If anyone has a copy of any of the mentioned emails, Nicky would love to have those as well, so please email them on in.
Those cases will apparently not go to trial for another several months, so each side has the potential to lose quite a bit of money if they lose their respective cases.
Hydra Money Related Problems
Fast forward to late 2009. The FTC has long since started cracking down on the most popular rebill offers in the industry, which had, for the past year or so, been making up a huge chunk of revenue for any network. As the lawsuits started coming, merchant accounts for the advertisers started getting frozen, leading to non-payments to networks, etc. This hurt everyone right down the line at pretty much every network out there. That’s no secret.
Well, on November 20, 2009, Zac Brandenberg filed a suit against Hydra LLC, which he was the CEO of. The WHY is a little bit complicated, but Nickycakes will try to summarize (keep in mind, Nicky is no lawyer, and there were over 250 pages of documents for this case that he had to go through):
- Hydra, just like many other networks, starts to get into money problems due to changes in the industry.
- Hydra’s main investor company (KAPI), which also had members on the board of directors, and was keeping the company afloat if it couldn’t afford to pay affiliates, decided it was no longer going to continue putting money into the company.
- The board of directors voted to let Zac Brandenberg decide if they wanted to file for Bankruptcy or Receivership (which is like bankruptcy, except the company is handed over to an impartial 3rd party to try and restructure or sell or file for bankruptcy if necessary).
- Zac looks for investors to try to get him out of this mess, and finds some, but they don’t want to invest if KAPI is still involved since they would get priority on money being paid back, and they’re also wary of all the lawsuits going on with the Walkers, because any one of those could easily sink the company in its fragile financial state.
- Zac goes to KAPI to see what it would take to remove their priority in being paid back so they can get some new investments, and an agreement is reached, but KAPI keeps demanding more and more money until finally they just say they want $2mil, which Hydra definitely doesn’t have, in order to go away, and effectively blocks any new investment money from coming in.
- Around this time, Wells Fargo informs Hydra that they are in default on their $10 mil credit line and need to start paying up.
- Zac files this lawsuit to go into Receivership so the company may be restructured which (nickycakes thinks) would get rid of KAPI and allow new money to be invested.
In these 250ish pages of court documents, there are some really ominous quotes by Zac (the CEO of Hydra) about the financial state of the company as of November 20th, 2009. Here are a few:
“Hydra does not have sufficient working capital. I anticipate that, in the next few business days, Hydra will not have sufficient funds to timely pay all of its employees and creditors, including its affiliates. Because of the reliance of Hydra on its affiliates, if timely payment cannot be made Hydra will begin rapidly to lose going concern value, as Hydra’s affiliates have many options that compete with Hydra in this commoditized space. These affiliates are highly motivated by consistend payments, and can be expected to react very negatively to any delay. Additionally, due to the nature of this business, the affiliates have the ability to, and would be expected to post negative messages about Hydra on internet message boards.”
Another very telling quote:
“Based upon the information Hydra provided to me, it appears that next week Hydra will collect $500,000 in accounts receivable, but will need to pay affiliates in the approximate sum of $601,000. … Based upon Hydra’s representations and the information provided to me, I agree that these expenses must be paid next week in order to keep the business operational. “
And:
“By November 20, 2009, Hydra will not have sufficient funds to timely pay all of its creditors. Due to the reliance of Hydra on its affiliate subcontractors, if timely payment cannot be made, Hydra will rapidly lose its going concern value.”
Feel free to read through the court filing for yourself. Be warned, it’s VERY long: COURT DOCS MIRROR
So, the result? Well, again, Nickycakes is no lawyer, but it looks like on Nov 20th, a judge ordered that Hydra should go into Receivership and in early December one was appointed.
Now here’s where things start getting fun. Less than two weeks later, a thread was started on Wickedfire forums asking about the fate of Hydra’s bonus program being cut without notice. Mason Wiley, VP of Marketing replied saying that the bonus and referral programs were cut because they were doing nothing to bring more revenue to the company.
Having a unique ability to smell BS from a mile away, Nickycakes questioned the motivation behind cutting the programs, noting that there had been rumors of Hydra going bankrupt recently.
Mason replied to the bankruptcy rumor:
we are NOT going bankrupt. You heard wrong dude.
Screenshot:
Why the need for a screenshot? Well, the thread continued with some back-and-forth between Nickycakes and other members questioning Wiley about the current financial state of Hydra. He replied that, while money had been tight in the past just like other networks, they were currently doing well. HOWEVER, these posts have mysteriously disappeared (most likely removed by Wickedfire admins after being petitioned by Hydra, but those facts may or may not come out at a later date).
Even with the majority of the posts removed from the thread, the one that does remain in which Mason claims the company is not going bankrupt is rather telling. Just weeks after the CEO filed court documents saying they probably couldn’t last 1 more week in their current financial situation, and with the company now in Receivership, which VERY often results in Bankruptcy, he is claiming that they are definitely NOT (and he was quite a condescending dick about it as well).
Since this pic was deleted from the Wickedfire thread, and since it is so damn relevant, please enjoy it here:
If you are an affiliate currently working with Hydra, please read the court documents posted and draw your own conclusions. The reason this was posted was not to drag Hydra’s name through the mud, but to bring to light information that could affect any affiliate running traffic with the network. When you’re working for yourself and a network goes under and can’t pay you, that may mean you can’t feed your family. A network trying to hide extremely significant financial issues from people who rely on them so heavily doesn’t sit right with the Cakes.
Keep it real.
UPDATE: After accusing Nickycakes of being biased for not reporting on the conclusion of the case, Mason Wiley, VP of Marketing at Hydra forwarded a 6 page document that shows the authorization the court gave for Hydra to be sold to “Marlboro Investment Group, LLC.” Wiley claims that this is the “conclusion” to the issue, but in reality it answers almost no real questions in this case. In fact, judging by the comments left since this article was posted, this just opens a whole new can of worms. Anyway, you can read the court filing for yourself, although it really doesn’t say much and certainly does not resolve the issues at hand: COURT DOC
Great post man, and brings to light a lot of answers to questions I’ve had over the last 6 months.
This is a great example of how infighting and too much leadership can really sink a big ship.
The removal of posts on WF is seriously lame, there wasn’t anything in the back and forth between you and Mason that was out of line or slanderous.
I did my best to read this post, but everytime I see the name Zac I think of Zac Johnson.
Ya, same here.
Zac is everywhere. ain’t he?
Oops. wrong zac.
Great post and details, I am glad I have never worked directly with Hydra.
Thanks Nicky,
I have run plenty of traffic with them and was always satisfied. After looking at 2010 I had them on my list of networks to use but they were not in the top. I’m glad I decided to move them down in my own ranks to run offers through.
Shit yo this should’ve been on 20/20
Like TMZ of the affiliate world.
This post if friggin awesome. Actually hydra deserved this. I reported a fraudster to hydra almost 5 times and these douche’s did nothing but paying him for his fraud. This kind of unprofessional thing can only happen with hydra. Die Hydra Die!
Damn…
Saw the thread awhile back… didn’t really believe it until just now when you read the court document and it says” We have 3.5 million in accounts receivable, we owe a 4 million dollar loan and have another 2 million in accounts payable” Well… 10 pages in, we are already 4 million in the hole…..
So no Hydra “Receivership Party” at ASW, I take it?
Thanks for boiling down a huge legal doc into a quick summary. Quite a task, I’d imagine
Nickycakes,
I will not deny what you dug up. It is public record after all, and was in fact covered in some detail on Wickedfire for much of the last six months. But it’s hardly objective reporting as you did not bother to report the story through its conclusion.
Here are the facts as to the conclusion, that you are free to corroborate:
Hydra and the Walkers settled all claims against each other. As a result, the Walkers no longer have a stake in Hydra and are free of their non-compete. The cases you mention in your post have, in fact, been dismissed.
The assets of Hydra were purchased by Marlboro Investment Group LLC – now renamed Hydra Group LLC. NOTE – Zac Brandenberg is one of the primary investors of this new group. Yes, Zac and others bought Hydra and paid a substantial amount to do so. Why would they do this if Hydra was going down the tubes?
As a result of this purchase, the newly restructured Hydra received substantial new investment to fund future growth and innovation. Regardless of what you read in court documents, Hydra has continued to pay its affiliate partners, employ 50+ people, and grow its new business initiatives.
I can’t understand why you have invested so much time and energy to propagate the rumor that Hydra is soon to go out of business. You got all the uncomplimentary and inflammatory details right, but failed to report on the big picture. As far as reporting goes, you offer a completely biased and misleading picture of where Hydra is today.
Without a doubt, there was a lot of drama and all of it came to a head in the 4th quarter. But the reality is that Hydra came through it, and is now in a much better place. I invite you to come visit Hydra anytime – I will pay to fly you out – and you can see the truth for yourself.
Mason Wiley
SVP Marketing, Hydra Group LLC
Mason, the fact that you’re sitting here still trying to deny financial problems, when the CEO went into great detail talking about them and claiming that I was trying to “propogate some rumor” is just laughable. My reporting is based on the court documents that I have.
I am reporting the FACTS that are in front of me, and based on very numerous court filings from Zac and Hydra over the past couple years against pretty much anyone that pisses them off, I’d rather stick to facts based on court documents that I have.
If you have some legal documents that prove your point (none of the ones I have do anything for your case) then please feel free to post them. otherwise your claims of financial stability are without merit, just as they were when you were spouting them weeks after your company went into receivership, and your CEO was claiming your company was millions in the hole with no way out.
“I will pay to fly you out – and you can see the truth for yourself.”
He offered to pay to fly you out there. Why don’t you take the offer so you can watch the elaborate dog and pony show they’ll put on for you. They have a whole performance with rehearsed lines and paid actors and actresses setup just for you. Take the offer. It’ll be fun.
because my time is worth a whole hell of a lot more than that
You neglected to mention that Zac petitioned the court to sell the assets (most likely cash on hand and receivables) to an unknown company that doesn’t appear to exist. I believe he planned to sell the assets (cash and receivables) to this Marloro Investment Group for next to nothing (I think he has a side deal and the cash and receivables will be funneled back to him), then fold Hydra leaving all of their affiliates high and dry. He will simply take all of the money that is owed to affiliates by conducting a legal, court approved sale to Marloro, go into hiding and start something else.
I am not disputing the facts. I am telling you that you left off without finishing the story. You or someone clearly spent a lot of time putting this all together. Why would you want to ignore the conclusion?
You did not report the dismissal of the lawsuits. You did not report the purchase of Hydra. These are all also a matter of public record.
The same CEO you claimed said there was no way out, led a group which purchased the company’s assets before the end of the year. That is also a matter of public record.
How do you explain that? And why would you not report that?
You insinuate that our business operations are still in jeopardy. But all one need do is look at the FULL public record to see the outcome and the truth. Your failure to do so raises questions as to what your agenda is.
Post court docs or it didn’t happen. Also, read the comment above yours for possible explanation.
Mason,
Your choice of words make it seem as if a non-compete agreement between Hydra and the Walkers was something traded for ownership in the Settlement agreement. The actual terms of the settlement are confidential. Hopefully you are well informed and now understand that non-compete agreements are not enforceable in California except under a very limited set of circumstances –none of which apply in this matter. I'd *happily* discuss the actual facts of the settlement if it didn't breach a confidentiality agreement. =]
Jason Walker
Co-Founder & Owner W4 LLC
Just send me your email address so i can send you the docs. It was authorized on the 10th of December. Resolution with the Walkers was the 15th.
As to Willie’s post, you’ll see in the document i will send you that liabilities (affiliate payouts) were bought too. And any Hydra pub will tell you that they continue to get paid on time.
nickycakes at gmail
although, from jason walker’s post above, it doesn’t seem like the docs you’re sending are either new, or show anything substantial either way.
Nicky, see the email I just sent you. You wanted proof that what I was saying was true – the doc I sent you shows the sale happened. Separately, Hydra is not going to discuss the terms of the settlement with the Walkers, except to say that it happened, which is something else I said in my response – that those legal matters are concluded and behind us.
I read the court documents you sent me, and posted a copy as well. The sale of Hydra to some random company does nothing to resolve any of the real issues presented.
It is pretty easy to see, however, how a company who thinks it’s a good idea to put you in charge of PR would run into management and financial problems.
wow, good post…thanks for the update…good thing im not working with hydra
I have done business with hydra for years and years and they never have paid me late, never done anything to hurt my business and always been very professional. And, I got paid in december on time as usual & I expect I will again tomorrow.
Thanks for the post Nicky – this is great. It appears that Hydra is in for a very rough year. Unfortunately, we're going to see more of this as other networks are going to default on their loans and payments to affiliates given what has transpired in the continuity space. Expect to see a wave of consolidation and insolvency in this industry in 2010 – only the well managed, well funded and diversified will survive.
This explains why Hydra has yet to answer their phone, return my calls, or even email me back about whether or not I've been accepted as an affiliate. After all, it always takes at least a month to here anything back from a cpa network after you've applied… :sarcasm:
By ASE last year everybody knew that hydra was going under. Still, good to point it out.
I meant “hear”, not “here”. Freudian slip.
"It is pretty easy to see, however, how a company who thinks it’s a good idea to put you in charge of PR would run into management and financial problems."
*ZING*
I have been answering the issues you raised. But to help make it easier, why don’t I answer them directly one by one…
Nickycakes: “Those cases will apparently not go to trial for another several months, so each side has the potential to lose quite a bit of money if they lose their respective cases.”
WRONG! Those cases have already been settled… as Jason Walker’s post affirms.
Nickycakes: “Mason Wiley, VP of Marketing replied saying that the bonus and referral programs were cut because they were doing nothing to bring more revenue to the company… Having a unique ability to smell BS from a mile away, Nickycakes questioned the motivation behind cutting the programs…”
TRUTH IS… The bonus and referral programs were costly and had little effect on volume. There is always a motivation in any business to cut costs that don’t produce ROI. And certainly with all the challenges we and all other networks faced in 2009, the pressure to cut costs that didn’t produce results was even greater.
Nickcakes: “HOWEVER, these posts have mysteriously disappeared (most likely removed by Wickedfire admins after being petitioned by Hydra.”
WRONG! Neither I nor anyone at Hydra petitioned to have posts removed from WF. As you have said to me, don’t claim it unless you can produce the proof.
Nickycakes: “Mason claims the company is not going bankrupt is rather telling…” and other insinuations I was lying.
TRUTH IS… Hydra went into receivorship, not bankruptcy. It did so with an investment group, led by our CEO, lined up and ready to put money into the company. And that is exactly what happened. So you can read everything in court docs at face value – like Nickycakes – or look at the bigger picture to understand what is really going on.
Nickycakes: “The reason this was posted was not to drag Hydra’s name through the mud…”
HMMMM… I wonder.
Ok Mason, you’re right. Hydra is the epitome of financial stability. Please hold while I invest lots of money in you.
Others have including our founder and CEO who certainly does have an inside view of our prospects. We would be glad to take your money too.
hehe Nicky…Hydras in such a good position that they are even begging for cash on a thread exposing them for what they are.
Have they answered any of the questions about all the mailers and media buy pubs that suddenly ran into “compliance issues” and weren’t paid last year…lets have transparency of all the guys they shutdown and didn’t pay so they could “dig out of this hole”..because I know plenty myself.
Lets also ask why so many people that left them said they did because of all the ‘alleged’ skimming
if you’re going to come with accusations, come with proof. emails, anything. anyone can make up some shit and post anonymously in the comments.
so you're saying everything is cool and you haven't fucked at least 10 people out of their commissions on bogus charges? How about you post EVERY FTC complaint you've gotten here? That seems to be your mo. I don't run shit through, but I know alot of people that did and they all got told they got FTC complaints in December 09. Post everyones name or you're just crooks.
They banned me ages ago, good riddance. Very informative post – couldn’t of done it better.
Yes we are cracking down on quality and eliminating obviously fraudulent traffic. When we catch it we are freezing accounts. If we were into skimming (which we are not) why would we turn off publishers when we could make more money skimming from them?
I will admit we often don’t reveal precisely how we catch the fraud to the pub in question as it will just reveal how to work around it — as has happened in the past. But it is as blatant as having all traffic originate from the same ISP. Many pubs have been indignant because we turned a blind eye before. Some we know because they have told us establish a base quality level, then start mixing in the good with the bad. But bigger advertisers won’t tolerate fraud traffic or traffic driven in an unauthorized way so neither can we.
And i wasn’t begging for cash. It was a joke.
Finally, thank you Nickycakes for demanding a standard of proof for anonymous accusations.
You people haven't paid me aswell , and i am sure there are 100;s of other affiliates going to post the same you people don't deserve to do any business , especially when trust is the prime factor
Great work Nicky, rep +.
Affiliates really are at a disadvantage when working with networks, so it’s refreshing to see a post like this. Regardless of what the actual facts are, it takes balls and a shit ton of time and energy to put a post like this together. I commend you for investing the time to help spread the word.
Hydra was good back in the day, but now they're a joke.
A month ago we were running a media buy promoting a certain lead generation campaign. Hydra had the same offer we were running with a bit higher payout. We decided to split test some of the traffic just to see how they converted compared to the other network.
When I went to pull the offer link, I realized it was private. I asked my Account Manager to open it up for us. She asked how I would be generating traffic. I told her a 'media buy'. Her response: "So is that like a banner? I don't understand what you mean by 'media buy'." It then took her a nice 48 hours to tell me the offer is no longer available and I should try an e-mail submit instead. LOL.
Hydra sucks!
Armjad i invite you and any other publisher who feels they are owed money by Hydra to email me directly and I will look into it. If the traffic delivered was legitimate and in compliance with campaign guidelines, I will see to it you are paid. Note we do not pay when the traffic is fraudulent or driven in a non-approved manner.
The suggestion that we routinely choose to not pay publishers for legitimate traffic is preposterous. The way we stay in business is by keeping the pubs who deliver quality volume happy. And we have been in business since 2003.
dude, seriously, learn how to use the “reply here” button. these are threaded comments.
Wow, thanks man for this post! It’s like finding out termites ate away the foundation of a house you were about to buy. What peeling away a layer will reveal.
Nickycakes,
It kind of stinks that thread I started in early January called “Is Hydra Out Of Business” was removed as Mason went back and forth with me also claiming Hydra was healthy and that he would contact me to sign me up. So clearly, you nailed what I suspected they are in the frying pan. It doesn’t take a rocket scientist to figure out when a network doesn’t pick up the phone or have the nerve to call a person back to realize – they are in the doghouse. Good summary man.
It seems pretty clear that Hydra is in good standing so far. I wouldn’t worry about this too much.
Hydra skipped out on a nice box of cash they owed me, then wouldn't answer the phone or even return my messages. Didn't think I'd ever see that from an affiliate network. I felt like a detective trying to figure out why I didn't get a payment or an answer. After that I swore I'd never send another hit to Hydra. No wonder they didn't wanna chalk the money up. Suckers.
the future of journalism right here. good job.
did you try getting comments from anyone?
I used to do a fair amount of volume with Hydra. I had been promoting an offer for numerous months with high quality traffic, when out of the blue they charged me back for “fraudulant” leads which was totally bogus. When I tried to discuss this with them their was no negotiation or working things out.
I also noticed that they reversed a payment to me at one point for a decent chunk of money. They never told me why or even made me aware of it, I found out by seeing it in my bank statements.
Not only that, but I was receiving $300-$500 a month for a long time now from referral payments…all of a sudden the program just disappeared and they discontinued paying me for the affiliates I sent to them who WERE generating legit high quality leads/sales.
I will never work with hydra again… although they used to be a decent company, they are now a huge joke.
I would feel bad . . . but Hydra decided to reject me for no reason after supplying adequate documentation of success with ClickBooth, Copeac, MaxBounty and others.
After they rejected me, I told them to casually and sincerely fuck off.
This is all music to my ears. . .
They banned my account and would not send me any proof or explanation. I never recieved payments I have been waiting for. Now this makes sense.
As an affiliate of Hydra, I liked them very much in the beginning (about 4 years ago) I referred a friend to them and all was good, we were both doing decent volume. Suddenly my referral payout dropped with no cause, I knew the friend I referred was still doing volume. I inquired only to be told the referral was now based on a % of profit not revenue generated. I was shocked. Their home page still said it was a % of rev. generated. They never changed their homepage but kept feeding me that line of bull.
Don’t worry, they pulled the entire referral program without notice recently so you don’t even have to worry about it!
lol @ hydra
Hydra always paid me on time (except the time the accounting chick sent a check instead of wire). 6 figures a month, never a slip up, even after all the drama. That being said – dealing with them was a lot of drama – maybe its the geography or something, it is like watching an episode of the hills.
This Mason guy it an argumentative douche bag. I love how this industry applies the titles of VP or Director to anyone with a heartbeat. Doesn’t this guy have anything better to do than go on blogs or crap like wikedfire? He is not doing a good job of selling Hydra.
Ive been to their office and seen their 50 people – even if I went there today that doesn’t prove solvency. Its a private company. Mason – if you want to prove your solvency and quiet the affiliate paranoia post your holdings and recent financial statements.
Otherwise spin the wheel guys.. I wouldn’t be too scared about Hydra not paying.. its the networks that we don’t rumors about that scare me. I don’t think there are many that aren’t on thin ice right now.
I guess this company is really in trouble, thus the reason for scamming affiliates for their hard earned money. Like me, Ive been promoting them before. Now, I decided to promote them again around last month. And I pushed some good volume for a certain offer. They let me promote the offer until its near the payout time, then next thing I knew was, when I try to login it says “account suspended”. And whatever you do, email them or IM them, they wont respond. Keep away from this network if I were you.
I would be extremely cautious working with Hydra. In my particular case, I was forced to file a lawsuit against Hydra for fraud. If anyone wants proof of their unethical practices, I would be happy to provide.