The Phia cookie stuffing scandal started as a tech story. It turned into something more uncomfortable: a diligence story. In July, Bloomberg reported on the AI shopping app. It said the app had quietly claimed affiliate commissions for sales it did not drive. Phoebe Gates, the daughter of Microsoft co-founder Bill Gates, co-founded the app with her former Stanford roommate Sophia Kianni. Then a second Bloomberg investigation in August reported the founders had known about the practice since December. It cited leaked internal messages. Through all of it, $43.5 million in funding never produced the one question that mattered. That funding included checks from some of the most famous names in business and entertainment. Yet nobody asked: how does this app actually make its money?

Inside the Phia cookie stuffing findings

Startup Fortune described Bloomberg’s investigation in detail. Researchers tested Phia’s browser extension across more than 50 retail sites. They found a consistent pattern. When a shopper reached checkout, a hidden tab would open. It inserted Phia’s referral code. That code replaced the code of the publisher that had actually sent the shopper there. One example involved a Nordstrom link from a Wirecutter review. There, the referring publisher lost its commission without any visible action by the shopper.

Independent affiliate researcher Ben Edelman spoke to Bloomberg. He said a commission requires a real user making a real click. The rules do not permit fake, simulated, imaginary, or hypothetical clicks. Capital One Shopping ran its own tests. It independently corroborated Bloomberg’s findings. Edelman later noted the behavior appeared concentrated in Phia’s iOS Safari extension. That area of the ecosystem historically gets less scrutiny.

The founders reportedly knew for months

The timeline turned a fixable bug into a credibility problem. Bloomberg first contacted Phia on July 7. A spokesperson said the company had learned of the issue within the last 24 hours. The spokesperson called the behavior “misattributions” in the codebase. They said the team had fixed it overnight.

But Bloomberg’s August 11 follow-up told a different story. TechCrunch reported on it. The report cited leaked Slack messages. They indicated Gates and Kianni had known about the cookie stuffing since December. By June, the practice had grown sharply. It covered an estimated 51 percent of the merchandise value Phia claimed credit for each month. Once the team disabled the features, daily revenue collapsed. It fell from roughly $80,000 to between $10,000 and $28,000. Phia has disputed some of Bloomberg’s claims. The company said the revenue drop also reflected disabling most monetization, not just the cookie stuffing. It said it is reversing fraudulent transactions and has hired a compliance head.

The fallout keeps spreading

Impact.com suspended Phia’s account after reviewing the behavior. Impact.com is the affiliate platform used by e-commerce brands. That matters. As Startup Fortune’s account put it, affiliate commissions were Phia’s business model. Separately, Inc. reported on FTC complaints. The Federal Trade Commission had been fielding consumer complaints about Phia’s undisclosed advertising since January. That was months before Bloomberg’s reporting. Inc. based its story on records obtained through a Freedom of Information Act request.

This is also the Honey pattern repeating. PayPal’s Honey faced the same cookie stuffing accusations from the same researcher. Honey now faces a class action lawsuit over it. The pattern is not one bad actor. It is a business model built on invisible checkout behavior. Nobody inside the company flags it, because the numbers look great.

The real scandal is the diligence nobody did

Phia raised $43.5 million in total. Kleiner Perkins led an $8 million seed round in September 2025. Notable Capital, Khosla Ventures, and Kleiner Perkins then led a $35.5 million Series A in May 2026. People reported the funding news. The angel list reads like an awards show. It includes Sydney Sweeney, Hailey Bieber, Paris Hilton, and Priyanka Chopra Jonas. It also includes Khloé Kardashian, Kris Jenner, Sara Blakely, and Sheryl Sandberg. More than 30 names appear in total.

Startup Fortune’s core criticism should worry every founder reading this. A shopping app’s revenue mechanics are knowable. Investors should have examined how Phia earned its affiliate revenue alongside its AI claims. When the founder is a household name and the angels are household names, scrutiny relaxes. That happens exactly when scrutiny should tighten. Social proof replaced diligence. Now the market is pricing the difference.

What founders should take from this

Audit your own growth mechanics before someone else does. If a revenue line depends on behavior a user would object to, that is not a growth hack. It is a liability on a timer. Publish how your affiliate or referral revenue actually works. Put a second pair of eyes on any code that touches checkout. A researcher, a journalist, or your own affiliate platform will audit your revenue mechanics eventually. The only question is whether you find the problem first.

Phia fixed the code when a reporter called. A simpler question will follow the founders longer than the code. Who should have noticed before the reporter did?

For more on how startups handle money and scrutiny, explore our related coverage. See our Entrepreneurship & Startups hub. Also read how investor scrutiny caught up with Polsia AI’s $30M raise and the pricing mistakes first-time founders make.