Honey Gets Terminated as Lawsuits Proceed

This is a cease and desist letter sent to me by PayPal's lawyers in December of last year.

In it, PayPal warned that my investigation was quote, defamatory, and described Honey's business practices as being quote, legal and responsible.

Well, just weeks after publishing that investigation, three of PayPal's largest affiliate network partners announced punitive actions against the company, with one of them, Rakuten, terminating the relationship with Honey entirely.resulting in their removal from over 2 ,000 online stores including Walmart, Lego, Sephora, Newegg, Uniqlo and Samsung to name a few.Likely costing Honey millions of dollars in lost affiliate revenue.Ouch.As a result, PayPal issued a statement of regret a few days later, claiming they had no idea they were in possession of code responsible for poaching affiliate commissions from content creators, insisting they only discovered the code after my reporting exposed it.

The same reporting they had just claimed was defamatory.Yeah.Yeah, that makes sense.

Now, not only is PayPal's claim that they had no idea a provable lie, but the code in question was formally included as evidence against them in the ongoing federal class action lawsuit.A lawsuit they desperately tried to have thrown out.Twice.But unfortunately for PayPal, the federal judge handling the case recently denied their motion to dismiss.Whether PayPal likes it or not, this lawsuit is moving forward.So in this video, I'll be walking you through everything that's been happening behind the scenes.

The lawsuits, network terminations, CEOs attacking my credibility while profiting from honey, hit pieces from industry publications who also have ties with PayPal.

Turns out, I've pissed off an entire industry.So, let's get into it.

One of the most interesting things to witness after releasing part 1 of my Honey series was the reaction from the affiliate industry, particularly those who stood to gain the most from Honey's business model.For example, Adam Ross, the CEO of Awin, one of Honey's largest affiliate network partners, wrote a LinkedIn post basically insinuating that my video was sensationalist clickbait.

Then there were guys like Brooke Shoff, the founder of a company that supplies monetizable coupon codes to Honey.He published an entire blog post calling my video a hit job, declaring that Honey did nothing wrong and that I was quote, 100 % wrong.

And there were even publications that took aim at my work with headlines like, What Mega Lad Got Wrong, who I later found out also had ties to Honey.Point is, the ones complaining the loudest all turned out to have skin in the game.But then it revealed the one thing they couldn't spin.Honey wasn't just stealing commissions, they had intentionally built an entire system around hiding their behaviour from the industry.The system was designed to profile who you were as a user.

If you look like a regular shopper, Honey ignored stand -down rules and allowed influencer commissions to be diverted into their own pockets.But if you look like someone from within the industry, Honey suddenly played by the rules to avoid getting caught.

They effectively engineered a defeat device, and with this revelation, the industry had no choice but to respond appropriately, including the ones who profit from Honey's business model.And the first to act was Rakuten, an affiliate network that connected Honey with over 2 ,000 online stores.Just weeks after exposing PayPal's Defeat device, Rakuten terminated their relationship with Honey entirely and sent the following notice to their clients.We're writing to let you know that publisher Honey has been terminated from the Rakuten advertising network.Therefore, this publisher has been removed from your affiliate program, effective immediately.Boom.

Just like that, Honey lost access to over 2 ,000 online stores.

stores, many of which were very big brand names.That is a huge hit for PayPal.But it also sucks for Rakuten.

Because keep in mind, affiliate networks like Rakuten are the organizations who run this industry.They set the rules, they enforce compliance, and they control the flow of sales.So when something as damning as this is brought to light, it's terrible PR for them.The fact that a YouTuber with zero experience in security research uncovered blatant fraud they had missed for years, it looks bad.

That said, while networks like Rakuten need to be seen enforcing the rules, they also earn a significant amount of money from publishers like Honey.You've probably heard the saying, money doesn't grow on trees, right?Well, in the affiliate industry, it kinda does, and for networks like Rakuten, Honey is one of the larger trees in their orchard.But wait, Doesn't Rakuten have its own coupon cashback extension?Yes, Rakuten Rewards is technically a competing extension, ironically one they too are being sued over, but that's a completely separate side of their business.As a network, Rakuten still earns money every time Honey claim commission for a sale, so trust me, they did not want to lose that partnership, yet they cut them loose anyways.

So initially I thought damn, well done Rakuten, the first network to take action against PayPal, even when it was detrimental to their business.

But that all changed after some internal emails between PayPal and Rakuten were brought to light through Discovery in the ongoing class action lawsuit.According to court filings, internal emails between Rakuten and PayPal show Honey has repeatedly violated Rakuten's stand down policies from as early as July 2020 and continuing even after the filing of the complaints in this action through at least May 2025.Yikes!

Not only does that look bad for PayPal,but it also looks terrible for Rakuten.They knew Honey was violating their stand down policies for years, and the entire time, they kept Honey on the network anyways.Now, some of those emails made it onto the public record, and after reading through them, the dynamic is honestly insane.

In this one email chain, Rakuten flags a stand -down violation to PayPal, and while PayPal initially responds, they then start ignoring Rakuten's emails, forcing them to repeatedly chase PayPal for an answer.

This goes on for weeks, and when PayPal finally addresses the violation, they tell Rakuten that their stand -down policies are quote, overreach.The fact that PayPal feels confident telling a network that their rules suck, really speaks to who actually runs this industry.

After seeing those emails, Rakuten's termination of Honey looks a whole lot less like them taking a principled stand, and a whole lot more like them pretending to act tough on compliance, knowing those emails would hit the public record.I did reach out to Rakuten for comment, but didn't hear back from them.But regardless of Rakuten's motives, this termination was still a disaster for PayPal.

It got the entire affiliate world talking, and just a few days later, PayPal quietly deactivated their defeat device and broke their silence.They apologized to the industry, if you can even call it that, via an exclusive statement to Halopana, the same publication that wrote the Watch Mega Lag Got Wrong article.LOL.

On Monday morning, Recruit & Advertising shared an email with partners, notifying them that PayPal's Honey Browser extension had been terminated from the network and removed from existing affiliate programs.

The dispute follows accusations from industry commentators and professionals that PayPal

Honey uses a defeat device to detect user type and selectively bypass stand -down policy.Rakuten Advertising declined to comment on the move.I wonder why.PayPal has now shared an exclusive response with Hello Partner.PayPal and Rakuten are long -standing partners.We are aware of the actions taken regarding PayPal and are working with them on a resolution.

The code causing this behaviour has been identified and no longer has an impact.

The code was implemented prior to PayPal's acquisition and appears to affect less than 0 .1 % of Honey's traffic.Now, PayPal claiming the Defeat device only affects 0 .1 % of Honey's traffic is, in my opinion, incredibly misleading without additional context.

As I highlighted in my last video, Honey stored the code for this Defeat device in the cloud, meaning they could alter how strict the system was at any time without ever updating their extension on Chrome.A single rule alteration could change how many people Honey targeted, and that's exactly what happened.

In 2023, Honey's Defeat device would ignore stand -alone rules for virtually everyone, unless they found cookies on your computer signalling that you had visited an affiliate network's website.clearly a tiny percentage of their users.But sometime between then and the release of my first video, PayPal quietly altered the rules, requiring users have at least 65 ,000 cashback points before they would break the rules.

They went from targeting a very large portion of their users to a much, much narrower set with one quiet update.So when PayPal says 0 .1%, was that under their latest rules or the old ones?I did ask PayPal for clarification, but unfortunately, they're not interested in answering my questions anymore.

Instead, they offered me a corporate slop statement, which I'll include at the end of this video.Now this next statement is really interesting.The spokesperson said that the code was only recently discovered by PayPal, and upon being made aware of it, the companyhas deactivated.That is patently false.

Yes, the Defeat device was developed in 2017 under the original founders leadership.Then PayPal inherited it when they acquired Honey in 2020.However, at the time, the Defeat device was encrypted, scrambled, so that even if someone found it, they couldn't read it.Then in 2021, under PayPal's ownership, the entire system was rebuilt.The rules were restructured into a completely new format and stored in plain text on PayPal's servers.That's not a minor tweak, that's a fundamental redesign.

PayPal's developers had to build that from the ground up.

You can't rebuild a system, continue adjusting its rules year after year, then claim you had no idea it existed.PayPal claiming ignorance here is f***ing wild.The way I see it, it's just a straight up lie.And let's not forget, I alerted PayPal to the Defeat device in my request to comment sent to them on December 18th.But rather than immediately deactivating it, PayPal labelled my accusations as not accurate and ignoring basic facts, then had their lawyers threaten to sue me.They only deactivated the code on January 13th, almost a full month later.

The article ends with a statement from a PayPal executive stating, We regret the impact this situation has had on our partners and look forward to working together for the betterment of the entire industry.Now, you may have noticed this article isn't exactly dripping with criticism against PayPal, and there's a very good reason for that.You see, when I first saw the What Megalag Got Wrong article, I initially brushed it off as a publication trying to be contrarian for clicks.But then they published another article, this time platforming a post from Honey co -founder Ryan Hudson, who attempted to write off my entire investigation as a conspiratorial hit piece.Both articles were written by the same journalist, Saul Wilkins,and for neither article did Saul offer me the right to respond, yet he had no problem doing that for PayPal.

So I'm thinking to myself, man, these guys at Hello Partner sure have a raging boner for Honey.This led to me digging into their company, and surprise surprise, Honey was a premier sponsor of their flagship conference.Probably should have disclosed their conflict of interest to their paying subscribers.But here's where it gets even more hilarious.Sol, the journalist, actually emailed this article to me explaining that Hello Partner is quote, Switzerland when it comes to industry disputes, which is why they didn't offer any opinions on PayPal getting booted from Rakuten.That's right, the guy who had no problem criticising my work is now claiming he's Switzerland.

You can't make this shit up.And get this, I offered Saul an exclusive statement to include in his article addressing the claims made by PayPal, something most journalists would jump at.But of course, it was never included.All things considered, pretty shocking behavior from a publication that lists inclusive and unbiased as one of its core values.Now, as annoying as this behavior is, bias in the media is by no means a new concept, and it makes navigating the news incredibly frustrating.

which is why I've partnered with today's sponsor, Ground News.Ground News curates news articles from thousands of outlets around the world, so you can compare how different publications cover the same story.And for each story, you can see how many outlets were tracked, who those outlets are, their political bias, reliability, ownership, and even the specific differences in the articles themselves.Let me show you a great example related to this investigation.

Bloomberg recently broke the news about another shopping extension engaging in nefarious behaviour, one that I too have been investigating since last year.It's called Fear, and it's co -foundedby Bill Gates's daughter Apparently being born to a billionaire just ain't enough now They were allegedly caught cookie stuffing as well as violating stand -down rules awesome more shady behavior in the industry now Look at how it's being framed most outlets are leading with the celebrity angle Bill Gates's daughter busted while others are highlighting that people in the industry raised red flags about this company long before the scandal broke.

Same story, but one framing is built around a famous name, while the other questions why the industry didn't act sooner.That distinction is something you can spot much quicker on Ground News, and that's why I took the sponsorship.I don't do many, but I've worked with Ground News in the past, and I'm really big on platforms that help cut through the noise and make my job easier.

If you'd like to give it a jam, go to ground .u .megalag and check it out.And if you subscribe through my link, you'll get 40 % off the Vantage subscription.You can also scan the QR code on the screen here if that's more convenient.Moving on, shortly following Rakuten's termination, the situation for PayPal only got worse.

The CEO of Impact, another major affiliate network, announced they too were taking action against Honey.

Following a thorough investigation, Impact has determined that Honey is out of compliance with our platform policies and has been removed from the Impact Discovery marketplace.

We have also temporarily suspended their account while we confirmed they have made the necessary changes to comply with our terms and conditions.

Now this sounds a lot worse than it really is, they basically just pulled Honey from their marketplace, meaning new merchants can't discover or partner with Honey.Online stores already partnered with Honey through impact will remain unaffected.Still sucks for PayPal, obviously, this limits their ability to grow, but that's about it.

The next network to take action was Awin, and this one mattered the most because Awin is by far PayPal's biggest affiliate network partner, giving Honey access to

16 ,000 merchants.The response came straight from their CEO Adam Ross, the same guy who initially brushed off my entire investigation as clickbait.

A1 Group is providing an update on its ongoing investigation into Honey's browser extension practices following recent public scrutiny within the affiliate marketing industry.As soon as A1 Group became aware of the allegations raised publicly, we opened a formal internal investigation into the activity in question.The investigation has since confirmed breaches of our publisher policies.Honey has confirmed they regret the impact the situation has had and agreed they will work with us In line with our standard enforcement processes, Ewing Group immediately took protective actions.These included suspending payments and access to new advertiser programs.

So Ewing cut honey off from new partnerships the same way Impact did.But on top of that, they also suspended Honey's payments and put them on a remediation plan.This plan involves PayPal funding certain initiatives, like giving networks access to their source code and implementing policies for online stores to manage and remove unauthorized coupon codes.Now, I will give credit where it's due.These three networks at least did something, which is more than we can say for these other networks who stayed silent and, as far as I can tell, did absolutely nothing.The consequences of these actions are significant.

This is terrible PR for PayPal, it's costing them real money, and it will almost certainly be used against them in the ongoing litigation.However, the fact that every single one of these networks has allowed Honey to continue operating on their platform is genuinely fucking insane.Even Rakuten, the one network that terminated Honey, has since quietly allowed them back onto their platform, and frankly, I'm not surprised.Look, these punitive measures obviously suck for PayPal, but when you consider the seriousness of what they did, it's nothing more than aslap on the wrist.And that sets a terrible precedent for the entire industry.

Because every bad actor just watched a fortune 500 company break the rules, build a system to cover it up, got caught, yet was ultimately allowed to continue doing business.Good luck enforcing the rules after that.Now, regardless of how these networks have handled this, the fallout from this scandal has still hit honey hard, and that's mostly thanks to you guys.So, I was curious to see if there were any measurable insights into how much damage has been done.Well, thanks to data compiled by my buddy Yelta, we can actually put some numbers to it.And it's brutal.

On top of losing 7 million users, Honey has also lost over 7 ,000 merchant partners, even after being allowed back onto Rakuten's network.We can see that in December 2024, Honey was partnered with roughly 35 ,000 online stores, and that number has since fallen to just over 28 ,000.That's a significant loss of business.And keep in mind, some merchant partners are more valuable to PayPal than others.For example, one of those lost partnerships was Apple, who was Honey's largest partner in terms of monetizable traffic.Here's a crazy statistic, Apple alone generated more shopping traffic than Honey's bottom 27 ,000 partnered stores combined.

And Apple wasn't the only big brand to jump ship, there's a ton of them.So yeah, that's gotta sting.Honey's database of coupons has taken a huge hit too.As of December last year, Honey had 90 ,000 coupons, but is now down to about 50 ,000.there's a very good reason for that loss of 40 ,000 coupons.One of the issues I highlighted in the series was Honey quietly harvesting coupon codes from users at checkout without their knowledge or consent.

As a result, private employee discounts, friends and family codes, and even military veteran discounts were ending up on Honey for anyone to use.Well, the vast majorityof codes recently removed were user source coupons, going from 29 ,000 down to just 3 ,000.

So it appears as though the networks have finally cracked down on this, which is a huge win for the small businesses who were affected by this behaviour.But it's not all good news.Of the 50 ,000 coupons Honey still has, at least 10 ,000 are still known to be expired.And PayPal is still applying those codes at checkout, fully aware that they're expired.I've confirmed this through multiple tests, as well as reviewing Honey's source code.Now keep in mind, Honey was previously claiming commissions on sales, even when they couldn't find you a working coupon.

And around the time I exposed this issue, PayPal had around 14 ,000 stores with no valid coupons, and zero cash back to offer.

So this wasn't some random edge case scenario as some people have speculated.No, people was earning legit money while wasting your time with expired codes.Google did try to put an end to this behaviour in 2025 by updating their chrome store policies.

This enforcement barred extensions like Honey from claiming commissions unless they actually provided users with some form of benefit.Sweet, problem solved right?Well, not quite.Honey found a simple but clever workaround.

They just quietly activated cashback across virtually all of their partnered stores.

That might sound like a win for consumers, and technically it is, but for the majority of the stores, Honey is only offering 0 .1 to 1 % cashback.And based on my own testing, Honey has only ever given me the minimum of the advertised range.

And based on the latest captured data, Honey offers this dog shit rate for almost 70 % of their cashback active merchants.Point is, Honey still benefits from enticing you with an expired coupon, because when it inevitably fails, they default to cashback, allowing them to cash in on the sale, while giving you pennies on the dollar.

But hey, on the bright side, at least PayPal aren't poaching affiliate commissions nearly as often as they once were.Speaking of which, let's discuss the ongoing class action lawsuits, because there have been some really significant developments there.As most of you already know, PayPal's behavior caught the attention of a ton of different law firms.One of the first to file was YouTuber and attorney LegalEagle, who filed a class action against PayPal Honey on behalf of content creators.After he filed, around 20 other law firms filed similar complaints across different states.Now, when you've got that many law firms suing over the same thing, the courts don't want to handle them all separately.

That's a huge waste of valuable court resources.So the cases get consolidated into one big class action, and the assigned judge selects a small group of law firms to lead the case.But that's just the creator lawsuit.Most people don't realize that on top of that, there are two additional class actions against PayPal over Honey.One brought on behalf of consumers in the United States, and another on behalf of consumers in the United Kingdom.

Both are suing PayPal for allegedly misleading consumers with false marketing claims.I'm not going into detail on those particular lawsuits today, but here's where they currently stand.

The case brought on behalf of consumers in the UK was recently dismissed.However, that decision is now being appealed in the Ninth Circuit Court of Appeals.As for the US consumer case, that's still ongoing.But let's talk about the creator lawsuit, which is being overseen by federal judge Beth Freeman in the Northern District of California.Three competing law firms were selected to represent the plaintiffs, the content creators.Interestingly, LegalEagle's firm wasn't one of the firms chosen.

I guess being first to file doesn't automatically win you a seat at the table.But hey, shout out to LegalEagle for taking the lead and bringing more attention to the story.Anyways, once the case is consolidated, the defendant, PayPal, gets to assess the claims made against them, and almost always, they file what's known as a motion to dismiss, which is them basically asking the judge to throw themout entirely before it even moves forward to trial.Now, in November 2025, there was a hearing on that motion to dismiss, which I listened into live, and during those oral arguments, it was pretty clear that Judge Freeman wasn't entirely convinced that the content creators had demonstrated that PayPal actually violated any contracts.So, things weren't exactly off to a good start.

But, the judge laid out for the lawyers where she felt the complaint fell short.She also allowed discovery to begin, meaning both sides now had to start handing over documents and evidence.And a few weeks later, she issued her formal decision, effectively dismissing all claims but with leave to amend.This means that while PayPal got a temporary win on paper, the lawyers representing the content creators were allowed to go back, fix the issues the judge highlighted, and file an amended complaint.

Regardless, it didn't take long for the usual suspects to take a premature victory lap.PayPal's lawyers, Hello Partner, and of course Ryan Hudson who tweeted case dismissed despite not owning the company anymore.

But, little did they know, I had an ace up my sleeve.That of course being the discovery of Honey's defeat device.And I was fairly confident that once exposed, it would help the case significantly.

And sure enough, after that video went live, the lawyers formally included it into the amended complaint.

Now, I'll be honest, I was a little worried they wouldn't because they only had like 5 or 6 days after my video was published before their amended complaint was due.But, they managed to pull it off.So, let's take a look.On page 65, we can see the following.PayPal devised several methods to ignore or circumvent stand -down protocols.PayPal designed Honey to surreptitiously avoid standing down at all when it detects the browser is likely being used by an actual consumer rather than a network tester or network auditor, i .

e.users who are not there to shop, but to test the browser extension for compliance with stand -down rules.Honey has created four basic criteria through which it determines whether the browser isstand down.The lawyers then lay out the four criteria Honey tested, how old your account was, how many cashback points you had earned, if you're on a blacklisted website with special rules, and lastly, whether you had visited an affiliate network's website, which the complaint describes as arguably the most glaring reveal of PayPal's bad intent.Couldn't agree more.

So there you have it.My big discovery now formally alleged in a federal complaint.Not gonna lie, after all the hard work I put into uncovering this, it feels good.And the inclusion of this evidence wasn't the only improvement.The lawyers did a great job strengthening the complaint across the board.Okay, but what effect has all of this had on the case?

Well, on June 4th, there was a second hearing on PayPal's motion to dismiss.

And this time, there was a completely different energy in the courtroom.The moment the hearing started, the judge made it clear that she believed this case could move forward.And when she invited PayPal's lead attorney to make his arguments, Richard Jacobson, the same lawyer who sent me the cease and desist, she joked that he had an uphill battle ahead of him and might not be winning the motion to dismiss.A brutal thing to hear before you've even opened your mouth.

And it only went downhill from there.Throughout the hearing, Judge Freeman constantly pushed back on PayPal's arguments, challenging them at every turn.To give you an example, at one point, PayPal tried arguing that affiliate IDs don't hold any real intrinsic value because they're just short strings of numbers and letters.The judge responded with something along the lines of, well, you could say the same thing about a dollar bill, to which Richard replied, quote, I don't know how to respond to that.And in my view, that kind of sums up PayPal's whole defense.On the other hand, as the lawyers representing the content creators presented their arguments, the judge mostly listened in without interrupting.

It was pretty obvious which way she was leaning.So it seemed very likely during this hearing that the amended complaint had done its job.Now, it's important to understand that when a judgerules on a motion to dismiss, it's not as simple as deciding whether to throw out the entire case or keep it.The judge has to go through each individual claim and decide on the merits of each one separately.So for example, she might say, yes, I see a legitimate case for computer fraud, but no, I don't think you've proven unfair business practices.

She could dismiss every claim besides one and the lawsuit would still move forward on that one remaining claim.just under a much more limited scope.And after listening to the hearing, I thought the judge would allow most of the claims to survive, but not all of them.Well, on June 22nd, Judge Freeman issued her final ruling, and every single claim survived.

That is a huge win for content creators, and a massive blow to PayPal.

So, what happens now?Well, now that the case has survived, there's no reason for the lawyers to delay the discovery process.That means paper handing over documents, internal communications, and their employees possibly facing depositions under oath.And given that the defeat device was developed prior to Paper's acquisition of Honey, it's entirely possible that the original founders, Ryan Hudson and George Ruan, get dragged into this process as well.And honestly, I think they should.A lot of this started while the company was under their leadership, and I think they need to be held accountable in some way.

It's also worth noting that since the defeat device was exposed, Ryan, who was previously very vocal in trying to defend his former company, has now gone completely silent.Pretty telling if you ask me.Now, with that all said, realistically, I think PayPal settles.

I doubt PayPal wants their developers sitting in a deposition room explaining the defeat device under oath.

And look, don't get me wrong, if a settlement gets content creators their money back, obviously I'm all for that.But a settlement also means those depositions may never happen.No testimony about whose idea it was to create this system.no one on the record explaining why it existed for 7 years, and the full story of what went on behind closed doors at Honey Well, that potentially stays buried forever.

But here's the thing, regardless of whether this case settles or goes to trial, there's something very important that I didn't get into in my last video, and it could make a huge difference for every affiliate who had their commission stolen.

You see, from the very first day that Hyundai deployed the Defeat device, they added code that documented every decision it made.So each time the system decided to violate stand -down rules, that decision was logged.Every time it decided to play safe, that too was logged, along with which rule triggered the decision.But more importantly, they also logged the original affiliate link the user clicked on, which often contains the original affiliate's ID, and in some cases, even the affiliate's name.Now, assuming PayPal has retained this data, and I think there's a very good chance they have, it means that somewhere on PayPal's servers lies a detailed record of every single instance in which this device enabled the theft of someone else's sale.And I'm fairly certain the lawyers will be demanding access to that data if they haven't already.

And if it's as comprehensive as I believe it is, a lot of the stolen commissions could potentially be traced back to the original affiliate it was taken from.

But here's a better idea.To the affiliate networks who are most certainly watching this video, if you truly care about protecting content affiliates, don't wait for the courts.Demand that telemetry data from PayPal and make them pay back any commissions that were stolen.It's the right thing to do.