Bill Gates’ “nepo baby” daughter Phoebe Gates is facing years behind bars after she was accused of “cookie stuffing” at her multibillion-dollar startup, Phia – a fraudulent practice that comes with a maximum penalty of 20 years in federal prison, according to reports.
Phia – a digital personal shopping assistant co-founded by Gates with fellow Stanford alum Sophia Kianni – reacted with shock in July following reports that it was dropping more web “cookies” than it should, fraudulently taking undue credit for online sales at retail partners.
The company released a statement that it had only learned of the issue “within the last 24 hours,” pledging to fix the glitch – but according to a new Bloomberg report, the young entrepreneurs had known for at least seven months that their startup was overcounting its sales commissions and making millions of dollars in the process.
Ariel Givner, founder and principal attorney at Givner Law, warned in a post on X Tuesday that “cookie stuffing” can come with serious consequences.
“It’s typically treated as federal wire fraud in US courts. There’s a possibility of a max penalty of up to 20 years prison + fines/restitution,” Givner wrote.
New York Post report: The startup – which raised a jaw-dropping $30 million in 2025 from backers including Hailey Bieber, Kris Jenner and Spanx founder Sara Blakely – operates as a browser extension, finding discount codes for customers across online retailers when they click on Phia at checkout.
When a shopper uses Phia by selecting one of its coupon codes, the software drops a “cookie” – which tracks activity across the web – to show that retailer it helped drive the sale and earn itself a commission.
But Kianni and Gates – the Microsoft princess whose dad is worth $108.4 billion, according to Forbes – were aware of features that dropped cookies into the checkout process even when customers did not use Phia, according to people familiar with the matter and internal Slack messages reviewed by Bloomberg.
The illicit cookie stuffing traced back to at least December across sales at several major retailers, including Nike, Gap and Nordstrom, and seemingly made up the bulk of Phia’s revenue, according to the news outlet.
After Phia disabled the features in July, average daily revenue at the company plummeted from around $80,000 to between $10,000 and $28,000, according to Bloomberg.
In June, cookie stuffing accounted for about 51% of the merchandise value that Phia claimed credit for selling, the report said.
A Phia spokesperson said part of the steep revenue decline in July was caused by the company disabling most of its monetization efforts at the time, not just the cookie stuffing, and that Bloomberg’s analysis of the data was overstated.
According to an internal dashboard viewed by Bloomberg, what Phia initially called a software bug in July was actually a feature called “enable coupon auto drop,” which the company was able to switch on and off.
At one point, Gates – who insisted that she wanted to succeed without her billionaire parents’ help, saying she has “such a desire to prove myself” – grew concerned that Phia wasn’t generating as much commission from Etsy as she had expected.