Ashley Madison CEO steps down in wake of hacking

The abrupt departure of Noel Biderman, which came without the appointment of an interim replacement, could be another sign that the website’s days may be numbered, experts say.

“Unless they can immediately assure the public that their information is protected, then their business is over,” says Lawrence Kellogg, a partner with the law firm Levine Kellogg Lehman Schneider & Grossman LLP, who specializes in class action lawsuits.

“The only reason for an adulterer to join the service is to keep their information private. Absent that, they don’t have a business.”

Kellogg says that if the lawsuits from Ashley Madison members keep piling up, Avid Life Media Inc., Ashley Madison’s parent company, may ultimately end up filing for bankruptcy protection.

And while those who sue the company may have a tough time proving their claims, costs related to the court fights could drain the company dry, he says.

In its statement, Avid Life says Biderman’s departure is effective immediately and was a mutual decision. The company will be led by its senior management until a replacement is named.

“This change is in the best interest of the company and allows us to continue to provide support to our members and dedicated employees,” Avid Life’s statement reads. “We are steadfast in our commitment to our customer base.”

Biderman didn’t immediately return an email sent to his work account seeking comment.

Biderman, who touted himself as “the king of infidelity,” made millions off the philosophy that cheating is a natural part of married life. The site charges a fee each time a member sends a potential lover a message.

Biderman has written books espousing his views on adultery, including one published in 2011 titled: “Cheaters Prosper — How Infidelity Will Save The Modern Marriage.” At the same time, the married father of two has claimed to be a devoted husband and that his wife of 12 years would be heartbroken if he ever broke his vows to her.

Privately held Toronto-based Avid Life grossed $115 million in earnings last year, according to tax documents and figures shared by Biderman with Forbes.

Avid Life’s statement released Friday went on to say that it’s “actively adjusting” to the fallout from the hacking and continues to provide access to its services. The company, which has offered a $500,000 Canadian (U.S. $378,204) reward for information leading to the arrest of the hackers, adds that it continues to cooperate with international law enforcement in their investigations.

While Biderman’s departure was a necessary move, it alone won’t be enough to save the company, given how much it marketed its promises of confidentiality, says Aaron Gordon, a partner with Schwartz Media Strategies, a Miami-based public relations firm that does crisis management.

“They can fold up and call it a day, but realize that there’s a demand for these kinds of services and that something else will bubble up and take over the market,” Gordon says.

“Or they could rebrand and come back to the market with a new brand centered on trust and security, but not confidentiality.”

Gordon pointed to ValuJet as an example of a company that was able to successfully remake itself after a disaster.

After a Florida plane crash in 1996 that killed all 110 people aboard, ValuJet bought AirTran, adopted the smaller rival’s name and moved its headquarters to Orlando, Florida. The company was subsequently acquired by Southwest Airlines Co.

Hackers originally breached Avid Life’s systems in July, accusing it of filling the site with fake profiles and charging fees for wiping profiles that were never truly deleted. The hackers posted the information online a month later after the company didn’t comply with their demands to shut down.

The posting of the data — including names, emails, home addresses, financial data and message history — has so far resulted in a flurry of lawsuits throughout the U.S. There also have been reports of extortion attempts and two unconfirmed suicides, according to Canadian police.

The credit-card information of U.S. government workers — some with sensitive jobs in the White House, Congress and the Justice Department — also was revealed in the breach. And hundreds of email addresses in the data release appear to be connected to federal, provincial and municipal workers across Canada.

Ashley Madison, whose slogan is “Life is short. Have an affair,” purports to have nearly 40 million members.