Bad news keeps coming at Bloomberg
Now comes word that thousands of clients' private messages were leaked online and were there for several years.
Adding to the outcry over news that Bloomberg reporters were caught snooping through the company's client data, the Financial Times reported Monday that more than 10,000 confidential messages sent from Bloomberg's terminals were leaked online several years ago and were discovered only recently. A "financial markets professional" found the trove of private messages through a Google search. They were taken down when the FT inquired about them.
The revelations by the FT, ironically a paper that Mike Bloomberg reportedly wants to buy, couldn't have come at a worse time for his company and its journalistic offshoot, which has already had to apologize for the first offense.
Goldman Sachs (GS), JPMorgan (JPM), the Federal Reserve, the European Central Bank and the Bank of Japan are among the Bloomberg customers that have complained about the practice, which Bloomberg Editor-in-Chief Matthew Winkler said was an "inexcusable" error. The company cut off reporters' access to the customer data after the complaints were made.
Although Bloomberg has said repeatedly that reporters didn't have access to data that would be valuable to investors, such as information about specific trades, it seems reasonable to assume that the Securities and Exchange Commission would want to verify that.
As reported here Monday, the data in question weren't easy to access. Moreover, it's highly unlikely that reporters would have stumbled across the information on their own, given the seemingly endless numbers of functions on the Bloomberg terminal. Determining who knew what and when should be tops on Bloomberg management's to-do list.
Whether the scandal will damage the Bloomberg brand remains to be seen. The privately held New York company charges about $20,000 annually for access to its terminal, which tries to keep financial users engaged by providing news in other areas as well, such as sports and the arts.
When Mike Bloomberg ran the company, before stepping away from an active role when he became New York City mayor, he used to brag to employees that he would never offer customers discounts to sign up for his service, a common tactic in the financial data industry. The strategy worked and still does, as evidenced by the company's reported $7.9 billion in revenue in 2012.
Bloomberg may have to rethink its position on data deals. According to The New York Times, rival Interactive Brokers sees the Bloomberg breach as a rare opportunity to gain business at the expense of its larger rival. Others, such as Thomson Reuters (TOC) and News Corp. (NWS), no doubt share that view as well.
And Goldman Sachs, which first called out Bloomberg for the spying among its journalists, is even said to be mulling its own secure messaging system, according to the New York Post. The paper says such a system "could be used within the trading community inside and outside of Goldman." That would be even more bad news for Bloomberg.
Jonathan Berr is a former Bloomberg News reporter. Follow him on Twitter @jdberr.
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Reports say the generous benefactor behind the huge gratuities is a former PayPal executive.
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