AOLTW is under investigation by both the SEC and the US Department of Justice (DoJ) for alleged financial misdealing such as improperly booking revenue from business partners like PurchasePro. AOLTW forged a deal with the business purchasing software company in March 2000 whereby it agreed to help PurchasePro sell its software in return for part of the revenue and warrants for PurchasePro's stock.
According to a report in the online edition of the Wall Street Journal, AOLTW is being investigated for cashing in $27m (£17m) worth of PurchasePro stock and booking it as advertising revenue.
No one from AOLTW or PurchasePro was immediately available to comment on the investigation Friday morning.
Authorities' investigation into AOLTW's dealings with PurchasePro is just part of a larger probe into the company's financial practices, which came into question following reports in the Washington Post last month that the company made unusual deals in an effort to prop up its AOL Internet unit.
The SEC has declined to comment on the investigation.