Virgin Mobile suit claims Sugar Mama partner misappropriated funds

Legal documents shed new light on Virgin Mobile USA's decision to pull the plug on its Sugar Mama program, which offered users free airtime in exchange for viewing ad spots, responding to branded text messages and completing surveys. A civil complaint filed by the operator against advertising solutions partner Ultramercial alleges the company misappropriated from Virgin Mobile more than $800,000 in revenue resulting from ads placed via Sugar Mama.

"Due to Ultramercial's wrongful conduct, Virgin Mobile recently ceased offering the Sugar Mama product indefinitely," reads the complaint, filed with the Supreme Court of the State of New York by the carrier's legal representation Cosner, Cosner & Youngelson. "Despite repeated demands, Ultramercial--which admits its outstanding debt to Virgin Mobile--has refused to pay Virgin Mobile the monies it is owed. Accordingly, by this action, Virgin Mobile seeks (i) to recover at least $814,543--the amount of advertising revenue converted by Ultramercial; (ii) the attorneys' fees its incurs in this action, as provided for under the parties' agreement; and (iii) punitive damages for Ultramercial's wrongful conduct."  

The complaint states that Virgin Mobile USA launched Sugar Mama in May of 2006--as of December 31, 2008, the program had approximately 900,000 registered customers. "Pursuant to a Master Partnership Agreement executed by the parties, Ultramercial provided the underlying technology that enabled the Sugar Mama program," the filing continues. "In return for creating the Sugar Mama site, Virgin Mobile paid Ultramercial a substantial fee. Ultramercial is the administrator of the Sugar Mama site. As such, the Agreement requires Ultramercial to (i) invoice and collect all monies from the sponsors running advertisements on Sugar Mama; (ii) remit all advertising revenue received to Virgin Mobile within ten (10) days of receipt; and (iii) provide monthly collection reports to Virgin Mobile... Virgin Mobile suspects that Ultramercial misappropriated the advertising fees in order to fund its own operations, at the expense of Virgin Mobile."

"Sugar Mama was quite innovative--we learned a lot about our customers," Virgin Mobile USA CEO Dan Schulman said in an interview with FierceMobileContent. "Obviously, there were some operational issues with the provider of the platform, but that doesn't mean that kind of service can't still be a successful one moving forward."

For more on the Sugar Mama suit:
- read this complaint

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