Honey Scandal Update: Full Breakdown & Transcript

[00:02] shmeckledorfs in YouTube's history has to be Honey's prevalence in to be Honey's prevalence in sponsorships. Honey being the browser extension that finds you coupons. It was being pumped everywhere by every

[00:15] YouTuber for quite a while. And then from out of nowhere a YouTuber named Megalad conducted a thorough long investigation on Honey revealing investigation on Honey revealing extremely shady potentially illegal

[00:30] things going on. And it's a story in case that I've been glued to because shit's hairier than my ass and it deals with a lot of money at stake here potentially. And Megalad has been in the crosshairs of some very powerful figures

[00:45] here seeking to like discredit him and his investigation. It's been like a wild series of events. And now he's just posted a new video updating everyone on where everything is in this case in this investigation against PayPal Honey. I

[00:58] video. I'll of course link it in the description. But I also want to go over it here myself, go over some of the parts about it because uh this Honey's looking like it's about to go extinct.

[01:11] >> 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,

[01:27] 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

[01:40] resulting in the removal from over 2,000 online stores including Walmart, Lego, Sephora, Newegg, Uniqlo, and Samsung to name a few. >> PayPal Honey was attempting to take Megalad down to legislation Lagoon there

[01:54] and just give him the shellacking. So they did try and cease and desist them claiming that what he was publishing was defamatory and that everything they did is all hunky-dory, every good stuff, sunshine, rainbows,

[02:06] this guy is a bad actor, this is, you know, a bunch of fish paste and hoo-ha, horse hockey, hogwash, and we have to disregard all of it and it's damaging So, please stop. Will you please stop? No more of that, please. We don't like

[02:21] people knowing that Honey is uh not overly trustworthy. And after MegaLag's previous video covering the inner workings of PayPal Honey and what was spaghetti and meatballs, they did actually suffer some pretty substantial

[02:37] losses there with these partnerships, the most notable of them being Rakuten, who was responsible for giving them access to major platforms like Walmart, for example. Now, full disclosure, I've never heard of

[02:50] Rakuten in my life. That sounds like a finishing move out of Naruto. I don't know what that is, but with the way MegaLag describes it and looking into these, like this was a huge blow to them that likely has cost them millions

[03:03] of dollars, no doubt. And in response to that, PayPal Honey is now singing a bit of a different tune than the one that's present in the cease and desist. >> As a result, PayPal issued a statement of regret a few days later, claiming

[03:18] they had no idea they're in possession of code responsible for poaching affiliate commissions from content creators, and since they only discovered the code after my reporting exposed it. The same reporting they had just claimed

[03:32] 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

[03:46] 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

[04:00] >> It really is an action-packed intro to this video here that grabs you by the nuts and shakes them. A lot has been happening. I know that in terms of like internet time, the Honey story is

[04:15] over a year ago. The initial video which blew up, and then even like the further nitty-gritty dive was seven months ago. So, most people have just completely neutralized by the men in black. But, that doesn't mean that it just stopped

[04:31] happening. This is like a serious case and one that deals with millions upon millions upon millions of dollars. So, it's a big deal, and this is just the speed at which things of this caliber move. Sometimes, it's glacial. It's

[04:45] never really going to be like, you know, cutthroat breakneck pace that they go at here when it's dealing with something of this size. But, anyway, PayPal, Honey, in their public apology with the ukulele out, tried to play

[04:57] dumb. We didn't know about this malicious code in there doing this malicious code in there doing this unsavory action. Oh, who we. Oh, we're as disgusted as you guys are to learn about this, and we only learned about it

[05:11] from the most recent reporting on it. The same reporting that we're calling defamatory, by the way. I mean, he's right to point out how nonsensical that is that with the cease and desist,

[05:25] defamatory. You're You're off your gourd, dude. Lay off the fint freak." But, then publicly with their like, you know, apology, and they they

[05:37] walk a very different path there about like, "We had no idea. It was only recently brought to our attention. I I We're stunned. But, not too stunned." They were still able to muster the strength and courage to try to have this

[05:51] lawsuit dismissed twice, to no avail. Thankfully, to no avail. I'm happy to see this progress. That's great news. They weren't able to just strong-arm their way through the legal system to bury this or anything, so that's pretty

[06:06] wonderful, actually. Megalags then briefly dove into some of the individuals that were very vocal in saying that Megalags wrong. One of them said he's 100% wrong. Another accused him of making sensationalized clickbait.

[06:20] him of making sensationalized clickbait. Uh boo Megalags, yay Honey. And Megalags then proved that the most vocal individuals that were doing this behavior, and even an outlet, all had ties to this industry. So, they benefit

[06:36] from Honey being successful. They don't want to see it fail or be exposed with these kind of really shady practices in their business. Because these individuals would also be hurt uh as well. Like they they don't they had skin

[06:51] in the game. Thus, were looking at ways to like poke holes in Megalags' credibility, even though they themselves are not reliable sources. They are very biased. So, like the things they were saying weren't coming from like a

[07:05] genuine place of critique, and it wasn't legitimate. It was all because they need Honey to survive. And I thought he did a very good job at defending himself were making against him. >> But then I revealed the one thing they

[07:19] stealing commissions, they had around hiding their behavior from the industry. The system was designed to profile who you were as a user. If you

[07:31] look like a regular shopper, Honey ignored standard 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

[07:43] 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

[07:56] act was Rakuten, an affiliate network that connected Honey with over 2,000 online stores. Doesn't Rakuten have its own coupon cashback extension? Yes, Rakuten Rewards is technically a competing extension. Ironically, one day

[08:10] two of being sued over, but that's a completely separate side of their business. As a network, Rakuten still earns money every time Honey claimed commission for a sale. So, trust me, they did not want to lose that

[08:23] anyways. >> The defeat device became really the silver bullet for this werewolf here. That is going to be something that this new video from Megalag, because that's the one where there is no spin to

[08:36] that's the one where there is no spin to put on it from these worms, man. There isn't a way of defeating it, and it even prompted action, like Rakuten here, which no doubt had some of the top brass over at Rakuten furious, [snorts]

[08:50] steaming. I like I I know they weren't happy, cuz that is a lot of a lot of clams left on the table there. They're missing out on a bunch of bones through the partnership with Honey, obviously. But, they did cut those ties.

[09:05] And Megalag dives into some really interesting stuff here in regards to Rakuten and how that kind of played out here. Interestingly, Rakuten has their own pseudo competitor to Honey, which has also landed them in some legal hot

[09:22] water with a lawsuit of their own plopped onto their lap. But, even going further, there were some things that were uh unveiled during discovery. >> After some internal emails between PayPal and Rakuten were brought to light

[09:35] 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 standard policies from as early as July 2020 and

[09:49] continuing even after the filing of the complaints in this action through at least May 2025. >> The point MegaLag is making here going through these documents and these emails is that Rakuten's not exactly the good

[10:04] guys taking a principled stance. They're not the heroes wearing the cape who, you know, found out about this and were aghast and and cut ties because it's, you know, that's unethical with Honey. They knew about

[10:18] this for years but still continued to keep them on their network. Obviously from it. And then they eventually did cut ties as this came out in discovery. So like, it's not

[10:32] necessarily them being principled as MegaLag explains. It's more so like they knew and the emails show like they were chasing PayPal down on the back end as well. And actually PayPal Honey even just blatantly boldly

[10:48] even called it overreach admitting like their rules are bogus like garbage. But and and yet they still kept them around for so long on the network. So, they're they're not exactly like the great guys or anything.

[11:02] >> 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

[11:15] apologized to the industry, if you can even call it that, via an exclusive statement to Hello Partner. The same publication that wrote the what MegaLag got wrong article. Lol. The dispute follows accusations from industry

[11:30] >> Okay, that's hilarious. They won't even cite me by name anymore. When I'm wrong, I'm Megalinks. When I'm right, I'm just a industry commentator. Classic. What a

[11:42] coinkidink. So, regardless of the motive, Rakuten cutting ties with Honey did cause huge ripples. It was a disaster for them. It was catastrophic. And that's when they did finally, you know, stop the radio silence, no more

[11:55] crickets. That's when their apology came out. And it happens to have been on the same publication that was criticizing Megalinks' coverage of Honey. And the things he got wrong. How peculiar. And I appreciated him pointing

[12:12] out the wackiness of them now just referring to Megalinks as this nebulous industry commentator, the elusive man, the man behind the desk as opposed to his name, which they were more than willing to proudly when they were saying

[12:26] willing to proudly when they were saying everything he got wrong with the Honey case and his coverage of it. But now that he's been proven right, it seems well, they they won't use his name. That doesn't make any sense. Why would they

[12:41] do that? The code causing this behavior 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. Unsurprisingly, they're trying

[12:53] to put makeup on this, spruce it up a little bit so it doesn't sound as bad as it actually was, claiming that it only affected 0.1%. This is what I'm talking that and the rule breaking and such only

[13:05] affecting such a small number. Megalinks doesn't pull any punches highlighting claim is because he does dive into how it previously operated where it was targeting basically everybody. And then there was

[13:20] like a subtle quiet change where then it more hyper-specifically focused on a portion of the user base. So, under new rules, yeah, it's a much lower amount that were affected, but the previous

[13:32] rules, which were there for a long time, much larger number. So, it's very misleading with PayPal's statement on who all was affected. Uh, then of course, we get to the next section where it's talking about like how surprised

[13:45] first place and that they, you know, deactivated it. interesting. The spokesperson said that the code was only recently discovered by PayPal, and upon being made aware of it, the company has deactivated. That is

[14:01] patently false. Yes, the defeat device was developed in 2017 under the original founder's leadership. Then PayPal inherited it when they Then PayPal inherited it when they acquired Honey in 2020. However, at the

[14:13] time, the defeat device was encrypted, scrambled, so that even if someone found scrambled, so that even if someone found it, they couldn't read it. Then in 2021, ownership, the entire system was rebuilt. The rules were restructured

[14:26] into a completely new format and stored in plain text on PayPal 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

[14:40] rules year after year, then claim you had no idea it existed. PayPal claiming ignorance here is wild. The way I see it, it's just a straight-up lie. >> That is definitely the way it smells here, like a stinky fib. And I think

[14:54] he's done a great job of explaining why it seems that way. Them trying to claim ignorance on this, I think is and I I believe anyone that's been paying attention at all and has followed this story can see how

[15:07] outrageous that concept is that they just had no idea about the existence of this stuff. I think that's very provably incorrect. At least I would think so. I think the evidence is overwhelmingly against that

[15:22] claim and the fact that they're even trying that is just insulting to human intelligence. And speaking of insulting the human intelligence, the next section he he puts a little bit of time into just walloping, dunking on that

[15:36] publication that made the article what MegaLag got wrong while like sucking the here of a Honey and doing their best to sweep for them. He was able to find some really strong connections between that publication, Hello Partner,

[15:50] and Honey. Honey happens to be one of their premier sponsors on one of their conferences. So, it seems like there was heavy incentive to be nice to Honey since they are pretty close together. They're in bed

[16:04] together. And MegaLag even showed that that journalist that wrote it had reached out to him saying how neutral they are on all of it, but very clearly having a bias towards Honey. Uh MegaLag even provided like an exclusive

[16:18] statement to Hello Partner. To that journalist, never got included. So, very journalist, never got included. So, very uh fishy behavior from them as well. And highlight on there, put putting a little light over there. So, you can take a

[16:33] operate. >> 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 over 16,000 merchants. The

[16:48] response came straight from the CEO, Adam Ross. The same guy who initially brushed off my entire investigation as clickbait. As soon as Awin Group became publicly, we opened a formal internal investigation into the activity in

[17:02] >> Did you? Is that what happened? Are you sure? Cuz your CEO is busy trying to like tar and feather MegaLag for daring talk about Honey negatively and provide all of this evidence for their shady practices that were really bad.

[17:17] So, their CEO of Awin, the initial response from him was sensationalist clickbait, just controversy for the sake of attention. It's just attention seeking. Cringe, kind of cringe, nothing here,

[17:31] nothing burger, all right, nothing to see, let's move along, move along. He's But, looks like the evidence was a little too compelling. They then did their own investigation at some point where they

[17:45] confirmed breaches and then took action. And Awin was a huge partner of Honey, so And Awin was a huge partner of Honey, so it was like an actual big deal that they were taking action in this way. But, yeah, it is pretty comical how the CEO

[18:00] of Awin was really vocal about how it's all just controversy for views. Who would sink so low for that? God, besmirching the good name of something like Honey. Uh, anyway though,

[18:14] from MegaLag because he then does like a really thorough breakdown on just how hard PayPal Honey has been hit in light of all of this that's been revealed about it. Not only in like the loss of users or like the loss of some of these

[18:28] partners, but they have just been kind of catching L's across the board because now more and more people are aware of how shady it is and that's been taking its toll, not just on the users, which they've lost on a huge chunk of users,

[18:43] but they've lost in many other avenues as well, all of which MegaLag covers, which I think is really interesting and highly recommend you check out. But, I do want to talk briefly on the lawsuits that are ongoing. The one that I think

[18:55] action creator lawsuits because so many creators have undoubtedly lost who knows how much have undoubtedly lost who knows how much money through the PayPal Honey business

[19:07] practices here. So, a lot of class actions were filed. It's a of them. They've been consolidated into a giant class action lawsuit that's ongoing. And additionally, there were two other class actions filed, one on behalf of

[19:21] consumers in the US and one on behalf of consumers in the UK over how misleading all of this was from PayPal Honey. The US one is still going. The UK one was dismissed, but is currently being appealed. And then LegalEagle goes into

[19:36] detail on where the class action is on behalf of creators. >> 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

[19:48] 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

[20:00] 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

[20:14] 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

[20:26] >> This was something I vividly remember because while covering this, I kept my finger on the pulse. And when it was initially looking like a PayPal victory, goober ass Ryan instantly took to celebrate despite like LegalEagle

[20:42] to celebrate despite like LegalEagle said, not owning the company anymore. So like this guy was very very vocal, puffing out his chest, a lot of bravado. But things did take a turn not for the best

[20:55] >> On June 4th, there was a second hearing time, there was a completely different hearing started, the judge made it clear that she believes this case [music]

[21:08] PayPal's lead attorney to make his arguments, Richard Jacobson, the same 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

[21:24] >> The way MegaLag describes this makes it sound straight out of like a sound straight out of like a television show. So, they they got kicked around the first time, came back with improved complaints and the

[21:36] inclusion now of MegaLag's research and discovery of everything there. It is now in the complaint. It is now very, very strong against PayPal Honey. And now the judge is singing a very different tune here about like how difficult PayPal

[21:50] Honey's going to have to work now. It's like that that's like some poetic >> And it only went downhill from there. Throughout the hearing, Judge Freeman arguments, challenging them at every turn. To give you an example, at one

[22:05] 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 lines of, "Well, you could say the same thing about a dollar bill." To

[22:18] which Richard replied, quote, "I don't know how to respond to that." And in my whole defense. >> I love that, man. Like going on record,

[22:30] It's just letters and numbers." You idiot. Everything is letters didn't just let that kind of gobbledygook fly in the courtroom. Like her counterpoint was very strong and there's like a million others that you

[22:45] could have easily served back to him that would have also just blue screened with the, you know, "I don't know how to respond to that." Cuz the argument he tried to make is

[22:57] Cuz the argument he tried to make is actual like Neanderthal brain type Of course the ID matters. What are you even trying to say? Like they're making a mockery of it by trying to make some kind of dumb argument like that.

[23:11] I am so happy to hear that the judge was was pushing back so harshly on things like that. Cuz that's crazy for them to even try. >> On June 22nd, Judge Freeman issued a final ruling and every single claim

[23:24] survived. That is a huge win for content creators and a massive blow to PayPal. creators and a massive blow to PayPal. So, what happens now? Well, now that the the lawyers to delay the discovery process. That means PayPal handing over

[23:39] documents, internal communications, and their employees possibly facing depositions under oath. And given that the defeat device was developed prior to PayPal's acquisition of Honey, it's entirely possible that the original

[23:51] Rwabiyirema, get dragged [music] into this process as well. And honestly, I think they should. A lot of the stuff that while the company was under their leadership and I think they need to be

[24:03] 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

[24:17] >> No, no, no, that's not telling at all. Don't read too much into that. Ryan's just been busy. He's a social guy. He's been, you know, snorting coke and having threesomes all the time, sucking on boobies. He's a cool dude.

[24:31] Like, yeah, he was like super vocal pushing back against you until the defeat device and now it's really looking pretty bad for PayPal, Honey, dude, like Ryan, he doesn't even own the company anymore. He like it doesn't even

[24:44] really care. But yeah, I imagine he's not super happy with how this is proceeding now. He's no longer, you know, pinky out, you going crazy pumping his fists. He's they just kind of abandoned it all now. I Maybe he's

[24:59] really to say? But, this is tremendous. All of the complaints are going forward. So, the case is proceeding. And hopefully that

[25:11] does lead to accountability here, because this is a very big deal with because this is a very big deal with what PayPal Honey was doing. There is a huge problem with it that has been highlighted, and now it's looking like

[25:24] there might be some serious repercussions. They've already faced repercussions. They've already faced some very big blowback, losing a lot of of its partners. But, like it's still around. They are still doing business.

[25:38] They're not kaput or anything, you know, it's not curtains. But, I think it trustworthy business at all. This is some scummy based on all the available evidence out there, and it's some real strong evidence. So, I would

[25:50] like to see this proceed where they are dragged into court under oath and have to talk about the defeat device and everything like that. Megalags settlement. I

[26:02] tend to agree that that's probably going to be what happens here, but I'd love to be surprised and actually see them have to talk about everything under oath and to talk about everything under oath and go into detail on all of this really

[26:16] not good stuff here, these barnacles at PayPal Honey. But, I guess >> From the very first day that Honey deployed the defeat device, they added code that documented every decision it made. So, each time the system decided

[26:30] to violate standard 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

[26:43] 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, they have, it means that somewhere on PayPal's servers lies a detailed record

[26:57] of every single instance in which the Sefari device enabled the theft of someone else's sale. And I'm fairly certain the lawyers will be demanding already. >> That's a pretty big deal, just to have a

[27:09] full ledger kept of every instance of theft and where it happened and who to. That's huge if they're able to get that information through discovery. Megalad calls on like the existing partners

[27:24] still with Honey to demand that data themselves, even outside of the courts. themselves, even outside of the courts. Which I imagine Honey will not provide if I had to wager a guess. But yeah, that would be massive cuz then they

[27:38] could get the exact amount and all of all of it just right there. But I guess we'll see. Anyway, I found this to be an extremely extremely extremely exciting development here in

[27:51] the case against Honey. Please go show support to Megalad for the work he's done on this case. It has been extraordinary even in light of him extraordinary even in light of him facing his own legal hamburgers getting

[28:03] served up from PayPal for his coverage of this. He continues to fight against them, which I think is just fantastic and the exact kind of journalism this this world needs a lot more of. Someone that's willing to fight tooth and nail

[28:16] against some absolute trash like this from PayPal. Honey. So, big hats off to Megalad. Hopefully the ongoing proceedings continue to look favorable. And yeah, that's really about it. So,