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07.20.12

Jennifer Sultan’s Arrest for Gun Running Caps Long Fall From Internet Success

Sultan reportedly made millions off the sale of the site she cofounded during the dotcom boom. But as Matt DeLuca reports, her business and personal back story is more complicated.

Until her arrest last week, Jennifer Sultan seemed to be living the good life. She was reportedly living with her boyfriend, Adam Cohen, in a tony apartment in Manhattan’s Flatiron District, complete with a private elevator and roof deck. The four-bedroom luxury residence is currently on the market for $6.25 million.

It was only a few blocks away, on Fifth Avenue near 20th Street, where Sultan and Cohen, who have dated for years, once kept the offices for Live On Line, the video-streaming website they built together and sold in 2000 for a reported $70 million.

“They were nice people,” said Dennis Scarna, an encoding engineer who took a job at the company in 1999. “They were professional about their business,” he said of Cohen and Sultan, who were dating at the time. “I didn’t notice any weirdness about them.”

Years later, prosecutors did. The charges they leveled against Sultan on July 13 include an accusation that the onetime digital pioneer sent a text message last month to one of her codefendants saying that she had a “toy.” Weeks later, according to the indictment, Sultan called the codefendant and discussed selling firearms with him, then sent him a text message in which she said she had a “357 mag for 850.”

The alleged gun-trafficking ring was broken up after a New York City police officer allegedly stole four guns and a bulletproof vest from the lockers of other officers at an East Village precinct. As police cast a wider net, they discovered her alleged connection to one of the other defendants, an accused weapons dealer named Ivan Chavez.

But the record shows that Sultan’s fall was more complicated than those facts would allow.

In its day, Live On Line was at the forefront of providing live streaming web video, Scarna said, often webcasting concerts by bands such as AC/DC and David Bowie. Sultan, who had worked as a freelance photographer, would attend the shows and take pictures of the performers.

“It wasn’t even a money thing. She just wanted to be big—she wanted to leave a legacy. She was a good girl.”

A year later, in 2000, Sultan and Cohen sold Live On Line to Digital Island, another Internet company. In the deal that supposedly made Cohen and Sultan’s fortunes, the Live On Line team netted $5.2 million in cash and close to 800,000 shares in the public company for Live On Line stakeholders.

New York tabloids have painted the story of the 38-year-old Sultan as a fairly straightforward tale. Indeed, Cohen and Sultan appeared to be living it up in the months following the sale of the company, spending more than $400,000 to rent an 11-bedroom Hamptons beach house for the summer. They also reportedly split a $35,000 pool installation bill with the getaway’s owner.

But exactly how well Sultan herself made out on the sale is unclear. According to securities filings made after the deal was struck, Cohen ended up with more than 295,000 shares of Digital Island—which at the time had a paper value of about $11.8 million. Sultan wound up with about a seventh of that amount—40,203 shares, worth about $1.5 million.

Alyssa Bauman, who graduated with Sultan from Shore Regional High School in West Long Branch, N.J., in 1992, said she was one of Sultan’s best friends, although the two had a falling out around the time of Live On Line’s sale.

“The company was big,” Bauman said of those exhilarating days in Manhattan. “She was living the life.” Sultan didn’t have much experience with video or the Internet, Bauman said, but “she was a great photographer.”

Sultan was always driven, Bauman said. “It didn’t seem like she had a lot of friends,” she said. “Her whole entire life was all about getting big.”

“It wasn’t even a money thing. She just wanted to be big—she wanted to leave a legacy,” Bauman said. “She was a good girl,” the friend added.

Bauman said that, at one point, Sultan and Cohen were married, though she remembers their marriage falling apart around the time of the sale to Digital Island. “It wasn’t a marriage for love, it was a marriage for convenience,” Bauman said. “I don’t know if it was financial or just for comfort.”

She never saw the two as a match, she said. “She always liked the bad boys.”

Repeated attempts to obtain comment from Cohen, Sultan, her family, or a lawyer representing Sultan were unsuccessful.

Within a year of acquiring Live On Line, Digital Island had hit rough waters. The company reeled as it lost top executives, including its chief financial officer. Cohen’s wealth, as well as Sultan’s, likely shrank as DI’s stock collapsed. (By 2011, markets got excited when the company’s prices inched up in one day to $3.70—which would have made Sultan’s shares worth less than $150,000.)

Sultan and Cohen eventually left the company, but by 2003 they were back in the game, becoming involved in Global Media Services, which state records show was incorporated as Media Services Acquisition Corporation in October 2002.

In 2009, GMS merged with a Seattle-based online video company called GridNetworks, but the venture seems to have only led to more losses and more litigation for Cohen and Sultan. After the merger, a federal suit was filed in Washington state against Media Services Acquisition Corporation by former employees who claimed that the company had not paid them on time. In an affidavit attached to 2010 bankruptcy proceedings, Cohen stated, “GMS was essentially defrauded and stripped of all cash on hand due to increased expenses, fees, and overhead which arose after the merger.”

The same filings list close to $4 million in claims owed to the couple’s largest creditors.

Those debts had consequences. In June 2010, Sultan and Cohen were summoned to answer a foreclosure complaint filed by Bank of America. Between 2001 and 2002, the couple took out $3 million in mortgages on their tony apartment near Union Square. After the couple missed eight months of payments, the bank took them to court.

Bauman said that she and Sultan cut ties around 2000 after an invitation to stay with her and Cohen in the Hamptons one summer was taken back without an explanation. Still, she was surprised to learn of the turn in her friend’s fortune, remembering her as strong-minded, with a firm sense of who she was and what she wanted.

“Jennifer is a big individual,” Bauman said. “She’s not a follower. She was always doing her own things. She wasn’t affected by other peoples’ decisions. It’s a very admirable trait.”