Balderton, the venture capital group dumped its 13.5 stake in Sulake yesterday. Habbo Hotel is accused of having failed to sufficiently monitor and moderate explicit content, according to an investigation.

One of British television broadcaster Channel 4’s reporters posed as a young girl while preparing a segment about the website and reported many instances of chants and interaction of an “explicit sexual nature”. Balderton’s decision to quit Sulake has apparently been motivated by the company’s slow response in handling the allegations.

Balderton said: “As soon as we realised child safety was being jeopardised, the partners took the unanimous decision to exit.” Balderton appears to have written down its entire Sulake share.

Habbo Hotel – the social networking site – has 265 million registered users, nine million unique visitors per month and is available in 11 languages.  In a statement published on Sulake’s website chief executive Paul LaFontaine said  that “to keep users safe, we filter content and block inappropriate users.

“We also employ more than 225 moderators, tracking some 70 million lines of conversation globally every day on a 24/7 basis.”