Did Citibank Block a Startup for Gay Content?

Updated: Fabulis, a new venture-backed startup from Jason Goldberg — founder of socialmedian.com and Jobster — says that its bank account was recently blocked by Citibank, without any notice from the bank. According to a phone conversation with someone from the bank, the block occurred because of “objectionable content” on the startup’s blog. There were no details on what the content was, but could it have something to do with the fact that Fabulis is a social network and lifestyle service that is aimed at gay men? Goldberg describes it in a blog post (hat tip to TechCrunch for noticing this first, along with Feedjit CEO Mark Maunder):

In a bit of strange and disturbing news, fabulis discovered today that someone(s) at Citibank had decided arbitrarily to block fabulis’ bank account due to what was described to us on the phone as “objectionable content” on our blog. In fact, the account — it turns out — was blocked a few days ago without anyone letting us know about it by phone or email.

As Goldberg notes, there are at least two issues here, and possibly three: one is that Citibank appears to be blocking or putting a hold on bank accounts because of content on a company’s blog — and doing so apparently without providing any notice to the company itself. Since when do banks review the blogs of companies that have accounts with them, and determine whether to give them access to their funds based on what they find there? The other issue is that the bank appears to have done this solely because there was gay content on the Fabulis blog (which doesn’t seem to have anything else on it that might fit under the term “objectionable content”).

In a comment on a post at Hacker News, Goldberg says that he spent three hours on the phone trying to sort the issue out, and that while he doesn’t think Citibank is a homophobic institution, he does think that “some compliance officer is a moron who made a really stupid decision.” The Fabulis founder also points out in his blog post that Fabulis isn’t exactly some shady red-light web site, but a well-funded startup backed by the Washington Post, Mayfield Fund’s Allen Morgan and Burson-Marsteller’s Don Baer. Goldberg, who was a co-founder of Jobster, also started and ran socialmedian.com, which was sold to Xing in 2008. For more on Fabulis, check out the site’s Q&A with Goldberg here.

The Fabulis founder says that a Citibank employee promised to review the site today, and that “if we do not get a good response to this on Thursday we are moving our bank account to a bank that respects and appreciates our business.” Goldberg is right to be upset if Citibank has in fact blocked his company’s account because of some unspecified content on the Fabulis blog. Could it be some kind of “cataloguing error,” as Amazon explained when gay-themed books all of a sudden disappeared from its index last year?

Update:

In a new blog post, Goldberg says that he spoke with a Citibank employee about the issue, and was told that the bank had decided to terminate the startup’s account because the “content was not in compliance with Citibank’s standard policies.” The Fabulis founder says that the bank’s management promised to review the situation today, but added that “regardless of Citi’s response we have decided we’re taking our banking elsewhere.”

We’ve contacted Citibank and will let you know if and when we get a response.

Update 2:

A new update on the Fabulis blog says a Citibank representative has called and apologized. According to Goldberg, the bank spokesperson said that “all 3 of the citibank individuals who over the past 24 hours each individually claimed that fabulis’ account was to be terminated for compliance issues around the content of our site, were all wrong to have said what they said.”

Update 3:

Citibank emailed this statement:

Citibank sincerely apologizes to Mr. Goldberg for this misunderstanding. This situation had nothing to do with the content of his web site and any comments by our staff to the contrary were incorrect; we are reviewing what happened. This was a technical issue about missing documentation that is required for new business accounts. Once we resolved the situation, we unblocked the account immediately. Mr. Goldberg is a valued customer and we appreciate his business. Also, Citi is strongly committed to diversity, including support for the gay, lesbian, bisexual and transgender community, and other organizations promoting diversity. In fact, this week Citi has announced the financing for the True Colors Residence, a housing facility for homeless GLBT youth in New York City.

Update 4:

Citibank may have thought that an apology would make its Fabulis problem go away, but they were mistaken. Jason Goldberg wrote a follow-up blog post called “Inside the Citi circus,” about how unsatisfactory Citibank’s apology was, and giving even more details about how various employees of the bank had referred to objectionable content on the site — at one point even suggesting that he actually come down to the branch to view the specific content — and how this clearly was not just some kind of “misunderstanding” over some missing documentation. In response, he got a further apology from the bank, which he also posted, saying it was much more sincere and that he had accepted it in good faith.

A couple of things seem fairly clear from this whole episode: 1) Citibank got a substantial amount of bad publicity, which it will probably get over, and 2) there are probably a lot of people at the bank who will wish that they had never heard of Jason Goldberg or his website before this week ends.

Post and thumbnail photos courtesy of Bob.Fornal

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